[Chapter XX]
Disintegration of the Ricardian School

1. [Robert Torrens]

[a) Smith and Ricardo on the Relation Between the
Average Rate of Profit and the Law of Value]

||782|Robert Torrens, An Essay on the
Production of Wealth etc., London, 1821.

Observation of competition—the phenomena of
production—shows that capitals of equal size yield an
equal amount of profit on the average, or that, given the
average rate of profit (and the term, average rate of
profit, has no other meaning), the amount of profit depends
on the amount of capital advanced.

Adam Smith has noted this fact. Its
connection with the theory of value which he put forward
caused him no pangs of conscience—especially since in
addition to what one might call his esoteric theory, he
advanced many others, and could recall one or another at his
pleasure. The sole reflection to which this question
gives rise is his polemic against the view which seeks to
resolve profit into “wages of superintendence”,
since, apart from any other circumstance, the work of
superintendence does not increase in the same measure as the
scale of production and, moreover, the value of the capital
advanced can increase, for instance, as a result of the
dearness of raw materials, without a corresponding growth in
the scale of production. He has no immanent law to
determine the average profit or its amount. He
merely says that competition reduces this x.

Ricardo (apart from a few merely chance remarks)
directly identifies profit with surplus-value
everywhere. Hence with him, commodities sell at a
profit not because they are sold above their
value, but because they are sold at their
value. Nevertheless, in considering value
(in Chapter I of the Principles) he is the first to
reflect at all on the relationship between the
determination of the value of commodities and
the phenomenon that capitals of equal size yield equal
profits. They can only do this inasmuch
as the commodities they produce—although they
are not sold at equal prices (one can, however, say that
their output has equal prices provided the value of that
part of constant capital which is not consumed is added to
the product)—yield the same surplus-value, the
same surplus of price over the price of the capital
outlay. Ricardo moreover is the first to draw
attention to the fact that capitals of equal size are by no
means of equal organic composition. The difference in
this composition he defined in the way traditional since
Adam Smith, namely as circulating and fixed capital, that
is, he saw only the differences arising from the process of
circulation.

He certainly does not directly say that it is a prima
facie contradiction of the law of value that capitals of
unequal organic composition, which consequently set unequal
amounts of immediate labour in motion, produce commodities
of the same value and yield the same surplus-value (which he
identifies with profit). On the contrary he begins his
investigation of value by assuming capital and a general
rate of profit. He identifies cost-price with
value from the very outset, and does not see that
from the very start this assumption is a prima facie
contradiction of the law of value. It is only on the
basis of this assumption—which contains the main
contradiction and the real difficulty—that he comes to
a particular case, changes in the level of wages,
their rise or fall. For the rate of profit to remain
uniform the rise or fall in wages, to which corresponds a
fall or rise in profit, must have unequal effects on
capitals of different organic composition. If wages
rise, then profits fall, and also the prices of commodities
in whose production a relatively large amount of fixed
capital is employed. Where the opposite is the case,
the results are likewise opposite. Under these
Circumstances, therefore, the “exchangeable
values” of the various commodities are not
determined by the labour-time required for their respective
production. In other words, this definition of an
equal rate of profit (and Ricardo arrives at it only in
individual cases and in this roundabout way) yielded by
capitals of different organic composition contradicts
the law of value or, as Ricardo says, constitutes an
exception to it, whereupon Malthus rightly remarks
that in the progress of ||783|
industry, the rule becomes the exception and the exception
the rule.[a] The
contradiction itself is not clearly expressed by Ricardo,
namely, not in the form: although one of the commodities
contains
more unpaid labour than the other—for the amount of
unpaid labour depends on the amount of paid labour, that is,
the amount of immediate labour employed provided the rate of
exploitation of the workers is equal—they nevertheless
yield equal values, or the same surplus of unpaid over paid
labour. The contradiction however occurs with him in a
particular form: in certain cases, wages, variations
in wages, affect the cost-price (he says, the exchangeable
values) of commodities.

Equally, differences in the time of turnover of
capital—whether the capital remains in the process of
production (even if not in the labour process) or in
circulation for a longer period, requiring not more work,
but more time for its turnover—these differences have
just as little effect on the equality of profit, and this
again contradicts (is, according to Ricardo, an
exception to) the law of value.

He has therefore presented the problem very
one-sidedly. Had he expressed it in a general way, he
would also have had a general solution.

But his great contribution remains: Ricardo has a notion
that there is a difference between value and cost-price,
and, in certain cases, even though he calls them
exceptions to the law of value, he formulates the
contradiction that capitals of unequal organic composition
(that is, in the last analysis, capitals which do not
exploit the same amount of living labour) yield equal
surplus-value (profit) and—if one disregards the fact
that a portion of the fixed capital enters into the labour
process without entering into the process that creates
value—equal values, commodities of equal value (or
rather [of equal] cost-price, but he confuses
this).

[b) Torrens’s Confusion in Defining the
Value of Labour and the Sources of Profit]

As we have seen,[b]Malthus uses this [the contradiction described by
Ricardo] in order to deny the validity of the Ricardian law
of value.

At the very beginning of his book, Torrens takes
this discovery of Ricardo as his point of departure, not,
however, to solve the problem, but to present the
“phenomenon” as the law of the phenomenon.

Supposing that capitals of different
degrees of durability are employed: “If a woollen and
a silk manufacturer were each to employ a capital of £2000 and if the former were to
employ £1,500 in durable machines, and £500 in
wages and materials; while the latter employed only
£500 in durable machines, and £1,500 in wages
and materials… Supposing that a tenth of these
fixed capitals is annually consumed, and that the rate of
profit is ten per cent, then, as the results of the woollen
manufacturer’s capital of £2,000, must, to give him
this profit, be £2,200, and as the value of his fixed
capital has been reduced by the progress of production from
£1,500 to £1,350, the goods produced must sell
for £850. And, in like manner, as the fixed
capital of the silk manufacturer is by the process of
production reduced one-tenth, or from £500 to
£450, the silks produced must, in order to yield him
the customary rate of profit upon his whole capital
of £2,000, sell for £1,750 … when
capitals equal in amount, but of different degrees of
durability, are employed, the articles produced, together
with the residue of capital, in one occupation, will be
equal in exchangeable value to the things produced, and the
residue of capital, in another occupation”
([R. Torrens, An Essay on the Production of Wealth,
London, 1821,] pp. 28-29).

Here the phenomenon manifested in competition is merely
mentioned, registered. Similarly a “customary
rate of profit” is presupposed without explaining
how it comes about, or even the feeling that this ought to
be explained.

“Equal capitals, or, in other
words, equal quantities of accumulated labour, will often
put in motion different quantities of immediate labour;
but neither does this furnish any exception to our general
principle” (loc. cit., pp. 29-30),

namely, to the fact that the value of the product plus
the residue of the capital not consumed, yield equal values,
or, what is the same thing, equal profits.

The merit of this passage does not consist in the fact
that Torrens here merely registers the phenomenon once again
without explaining it, but in the fact that he defines the
difference by stating that equal capitals set in motion
unequal quantities of living labour, though he immediately
spoils it by declaring it to be a “special”
case. If the value is equal to the labour worked up,
embodied in a commodity, then it is clear that—if the
commodities are sold at their value—the surplus-value
contained in them can only be equal to the unpaid, or
surplus labour, which they contain. But this surplus
labour—given the same rate of exploitation of the
worker—cannot be equal in the case of capitals which
put in motion different quantities of immediate labour,
whether it is the immediate production process or the period
of circulation which is the cause of this difference.
It is therefore to Torrens’s credit that he expresses
this. What does he conclude from it? That here
||784| within capitalist
production the law of value suddenly changes. That is,
that the law of value, which
is abstracted from capitalist production, contradicts
capitalist phenomena. And what does he put in its
place? Absolutely nothing but the crude, thoughtless,
verbal expression of the phenomenon which has to be
explained.

“In that early period of
society”

(that is, precisely when exchange-value in general, the
product as commodity, is hardly developed at all, and
consequently when there is no law of value either)

“the total quantity of labour,
accumulated and immediate, expended on production, is
that […] which […] determines the quantity of
one commodity which shall be received for a given quantity
of another. When stock has accumulated,
when capitalists became a class distinct from
labourers, […] when the person who undertakes any
branch of industry, does not perform his own work, but
advances subsistence and materials to others, then it is the
amount of capital, or the quantity of accumulated
labour expended in production, […] which
determines the exchangeable power of commodities”
(op. cit., pp. 33-34).

“As long as [these] two capitals
[are] equal [the law of competition, always tending to
equalise the profits of stock, will keep] their products of
equal […] value, however we may vary the quantity
of immediate labour which they put in motion, or which
their products may require […] if we render
these capitals unequal in amount, [the same law must render]
their products of unequal value, though the total quantity
of labour expended upon each, should be precisely
equal” (op. cit., p. 39).

“… after the separation of
capitalists and labour[ers], it is […] the
amount of capital, or quantity of accumulated labour,
and not as before this separation, the sum of
accumulated and immediate labour, expended on production,
which determines the exchangeable value…”
(loc. cit., pp. 39-40).

Here again, he merely states the phenomenon that capitals
of equal size yield equal profits or that the cost-price of
commodities is equal to the price of the capital advanced
plus the average profit; there is at the same time a hint
that—since equal capitals put in motion different
quantities of immediate labour—this phenomenon
is, prima facie, inconsistent with the determination
of the value of commodities by the amount of labour-time
embodied in them. The remark [made by Torrens] that
this phenomenon of capitalist production only manifests
itself when capital comes into existence—[when] the
classes of capitalists and workers [arise, and] the
objective conditions of labour acquire an independent
existence as capital—is tautology.

But how the separation of the [factors necessary]
for the production of commodities—into capitalists and
workers, capital
and wage-labour—upsets the law of value of
commodities is merely “inferred” from the
uncomprehended phenomenon.

Ricardo sought to prove that, apart from certain
exceptions, the separation between capital and wage-labour
does not change anything in the determination of the value
of commodities. Basing himself on the exceptions noted
by Ricardo, Torrens rejects the law. He reverts to
Adam Smith (against whom the Ricardian demonstration is
directed) according to whom the value of commodities was
determined by the labour-time embodied in them “in
that early period” when men confronted one another
simply as owners and exchangers of goods, but not when
capital and property in land have been evolved. This
means (as I observed in Part I) that the law which applies
to commodities qua commodities, no longer applies to
them once they are regarded as capital or as products of
capital, or as soon as there is, in general, an advance from
the commodity to capital. On the other hand, the
product wholly assumes the form of a commodity only—as
a result of the fact that the entire product has to be
transformed into exchange-value and that also all the
ingredients necessary for its production enter it as
commodities—in other words it wholly becomes a
commodity only with the development and on the basis of
capitalist production. Thus the law of value is
supposed to be valid for a type of production which produces
no commodities (or produces commodities only to a limited
extent) and not to be valid for a type of production which
is based on the product as a commodity. The law
itself, as well as the commodity as the general form of the
product, is abstracted from capitalist production and yet it
is precisely in respect of capitalist production that the
law is held to be invalid.

The proposition regarding the influence of the separation
of “capital and labour” on the determination of
value—apart from the tautology that capital cannot
determine prices so long as it does not as yet
exist—is moreover a quite superficial translation of a
fact manifesting itself on the surface of capitalist
production. So long as each person works himself with
his own tools and sells his product himself <but in reality,
the necessity to sell products on a ||785| social scale never coincides
with production carried on with the producer’s own means of
production>, his costs comprise the cost of both the
tools and the labour he performs. The cost
to the capitalist consists in the capital he
advances—in the sum of values he expends on
production—not in labour, which he does not
perform, and which only costs himwhat he pays for it. This is a very good reason for
the capitalists to calculate and distribute the (social)
surplus-value amongst themselves according to the size of
their capital outlay and not according to the quantity of
immediate labour which a given capital puts in motion.
But it does not explain where the surplus-value—which
has to be distributed and is distributed in this
way—comes from.

Torrens adheres to Ricardo insofar as he maintains that
the value of a commodity is determined by the quantity of
labour, but he declares that [it is] only the
“quantity of accumulated labour” expended
upon the production of commodities which determines their
value. Here, however, Torrens lands himself in a fine
mess.

For example, the value of woollen cloth is determined by
the accumulated labour contained in the loom, the
wool, etc., and the wages, which constitute the ingredients
of its production, accumulated labour, which, in this
context, means nothing else but embodied labour,
materialised labour-time. However, once the woollen
cloth is ready and production is over, the immediate labour
expended on the woollen cloth has likewise been transformed
into accumulated or materialised labour. Then why
should the value of the loom and of the wool be determined
by the materialised labour (which is nothing but immediate
labour embodied in an object, in a result, in a useful
thing) they contain, and the value of the woollen cloth not
be so determined? If the woollen cloth in turn becomes
a component part of production in say dyeing or tailoring,
then it is “accumulated labour”, and the value
of the coat is determined by the wages of the workers, their
tools and the woollen cloth, the value of which is
determined by the “accumulated labour” contained
in it. If I regard a commodity as capital, that
means in this context as a condition of production, then its
value resolves itself into immediate labour, which is called
“accumulated labour” because it exists in a
materialised form. On the other hand, if I regard the
same commodity as a commodity, as a product and result of
the [production] process, then it is definitely not
determined by the labour which is accumulated in it, but by
the labour accumulated in its conditions of production.

It is indeed a fine vicious circle to seek to determine
the value of a commodity by the value of the capital, since
the value of the capital is equal to the value of the
commodities of which it is made up.

“Capital is commodities.
If the value of commodities, then, depends upon the value of
capital, it depends upon the value of
commodities…” [James Mill, Elements of
Political Economy, London, 1821, p. 74].

One thing more is to be noted here. Since
[according to Torrens] the value of a commodity is
determined by the value of the capital which produces it,
or, in other words, by the quantity of labour, the labour
accumulated and embodied in this capital, then only two
possibilities ensue.

The commodity contains: first, the value of the fixed
capital used up; second, the value of the raw material or
the quantity of labour contained in the fixed capital and
raw material; third, the quantity of labour which is
materialised in the money or in the commodities which
function as wages.

Now there are two [possibilities]:

The “accumulated” labour contained in the
fixed capital and raw material remains the same after the
process of production as it was before. As far as the
third part of the “accumulated labour” advanced
is concerned, the worker replaces it by his “immediate
labour”, that is, the “immediate labour”
added to the raw material, etc., represents just as much
accumulated labour in the commodity, in the product, as was
contained in the wages. Or it represents more.
If it represents more, the commodity contains more
accumulated labour than the capital advanced did. Then
profit arises precisely out of the surplus of accumulated
labour contained in the commodity over that contained in the
capital advanced. And the value of ||786| the commodity is determined,
as previously, by the quantity of labour (accumulated plus
immediate) contained in it (in the commodity the latter type
of labour likewise constitutes accumulated, and no longer
immediate, labour. It is immediate labour in the
production process, and accumulated labour in the
product).

Or [i.e., in the first case] immediate labour only
represents the quantity [of labour] embodied in the wage, is
only an equivalent of it. (If it were less than this,
the point to be explained would not be why the capitalist
makes a profit but how it comes about that he makes no
loss.) Where does the profit come from in this
case? Where does the surplus-value, i.e., the excess
of the value of the commodity over the value of the
component parts of production, or over that of the capital
outlay, arise? Not in the production process
itself—so that merely its realisation takes
place in the process of exchange, or in the circulation
process—but in the exchange process, in the
circulation process. We thus come back to Malthus and
the crude mercantilist conception of “profit upon
expropriation”. And it is this conception at
which Mr. Torrens consistently arrives, although he is, on
the other hand, sufficiently inconsistent to explain this
payable value not by means of an inexplicable fund
dropped down from the skies, namely, a fund which provides
not only an equivalent for the commodity, but a surplus over
and above this equivalent, and is derived from the means of
the purchaser, who is always able to pay for the commodity
above its value without selling it above its
value—thus reducing the whole thing to thin air.
Torrens, who is not as consistent as Malthus, does not have
recourse to such a fiction, but, on the contrary, asserts
that “effectual demand”—the sum of values
paid for the product—arises from supply alone,
and is therefore likewise a commodity; and thus, since the
two sides are both buyers and sellers, it is impossible to
see how they can mutually cheat one another to the same
extent.

“The effectual demand for any
commodity is always determined, and under any given rate of
profit, is constantly commensurate with the quantity of the
ingredients of capital, or of the things required in its
production, which consumers may be able and willing to offer
in exchange for it” (Torrens, An Essay on the
Production of Wealth, London, 1821, p. 344).

“… increased supply is the
one and only cause of increased effectual demand”
(op. cit., p. 348).

Malthus, who quotes this passage from Torrens, is quite
justified in protesting against it(Definitions in
Political Economy, London, 1827, p. 59).[c]

But the following passages about production costs,
etc., demonstrate that Torrens does indeed arrive at such
absurd conclusions.

“Market price” (Malthus
calls it “purchasing value”) “must always
include the customary rate of profit for the time being;
[but] natural price, consisting of the cost of
production or, in other words, of the capital
expended in raising or fabricating commodities, cannot
include the rate of profit” ([Torrens], op. cit.,
p. 51).

“The farmer […] expends one
hundred quarters of corn in cultivating his fields, and
obtains in return one hundred and twenty quarters. In
this case, twenty quarters, being the excess of produce
above expenditure, constitute the farmer’s profit; but it
would be absurd to call this excess, or profit, a part of
the expenditure”… Likewise “the
master manufacturer […] obtains in return a quantity
of finished work. This finished work must possess a
higher exchangeable value than the materials
etc.” (loc. cit., pp. 51-53).

“Effectual
demand consists in the power and inclination, on the port
of consumers to give for commodities, either by
immediate or circuitous barter, some greater
portion[d] of all
the ingredients of capital than their production
costs” (op. cit., p. 349).

120 quarters of corn are most certainly more than 100
quarters. But—if one merely considers the
use-value and the process it goes through, that is, in
reality, the vegetative or physiological ||787| process, as is the case
here—it would be wrong to say, not indeed, with regard
to the 20 quarters, but with regard to the elements which go
to make them up, that they do not enter into the
production process. If this were so, they could
never emerge from it. In addition to the 100 quarters
of corn—the seeds—various chemical ingredients
supplied by the manure, salts contained in the soil, water,
air, light, are all involved in the process which transforms
100 quarters of corn into 120. The transformation and
absorption of the elements, the ingredients, the
conditions—the expenditure of nature, which
transforms 100 quarters into 120—takes place in the
production process itself and the elements of these
20 quarters enter into this process itself as physiological
“expenditure”, the result of which is the
transformation of 100 quarters into 120.

Regarded merely from the standpoint of use-value, these
20 quarters are not mere profit. The inorganic
components have been merely assimilated by the organic
components and transformed into organic material.
Without the addition of matter—and this is the
physiological expenditure—the 100 qrs. would never
become 120. Thus it can in fact be said even from the
point of view of mere use-value, that is, regarding corn as
corn—what enters into corn in inorganic form, as
expenditure, appears in organic form, as the
actual result, the 20 quarters, i.e., as the surplus
of the corn harvested over the corn sown.

But these considerations, in themselves, have as little
to do with the question of profit, as if one were to say
that lengths of wire which, in the production process, are
stretched to a thousand times the length of the metal from
which they are fabricated, yield a thousandfold
profit since their length has been increased a
thousandfold. In the case of the wire, the length has
been increased, in the case of corn, the quantity. But
neither increase in length nor increase in quantity
constitutes profit, which is
applicable solely to exchange-value, although
exchange-value manifests itself in a surplus product.

As far as exchange-value is concerned, there is no need
to explain further that the value of 90 quarters of corn can
be equal to (or greater than) the value of 100 quarters,
that the value of 100 quarters can be greater than that of
120 quarters, and that of 120 quarters greater than that of
500.

Thus, on the basis of one example which has
nothing to do with profit, with the surplus in the
value of the product over the value of the
capital outlay. Torrens draws conclusions about
profit. And even considered physiologically, as
use-value, his example is wrong since, in actual fact, the
20 quarters of corn which form the surplus product already
exist in one way or another in the production process,
although in a different form.

Finally, Torrens blurts out the brilliant old conception
that profit is profit upon expropriation.

[c) Torrens and the Conception of Production Costs]

One of Torrens’s merits is that he has at all raised the
controversial question: what are production
costs. Ricardo continually confuses the
value of commodities with their production
costs (insofar as they are equal to the cost-price) and
is consequently astonished that Say, although he
believes that prices are determined by production costs,
draws different conclusions. Malthus, like Ricardo,
asserts that the price of a commodity is determined by the
cost of production, and, like Ricardo, he includes the
profit in the production costs. Nevertheless, he
defines value in a different way, not by the quantity of
labour contained in the commodity, but by the quantity of
labour it can command.

The ambiguities surrounding the concept of production
costs arise from the very nature of capitalist
production.

Firstly: The cost to the capitalist of the
commodity (he produces) is, naturally, what it costs
him. It costs him nothing—that is, he
expends no value upon it—apart from the value of the
capital advanced. If he lays out £100 on
raw materials, machinery, wages, etc., in order to produce
the commodity, it costs him £100, neither more nor
less. Apart from the labour embodied in these
advances, apart from the accumulated labour that is
contained in the capital expended and determines the value
of the commodities expended [in the production process], it
costs him no labour. What the immediate labour
costs him is the wages he pays
for it. Apart from these wages, the immediate
labour costs him nothing, and apart from immediate labour he
advances nothing except the value of the constant
capital.

||788| It is in this sense
that Torrens understands production costs, and this is the
sense in which every capitalist understands them when he
calculates his profit, whatever its rate may be.

Production costs are here equated with the outlay
of the capitalist, which is equal to the value of the
capital advanced, i.e., to the quantity of the labour
contained in the advanced commodities. Every
economist, including Ricardo, uses this definition of
production costs, whether they are called advances or
expenses, etc. This is what Malthus calls the
producing price as opposed to the purchaser’s
price. The transformation of surplus-value into
profit corresponds to this definition of
expenses.

Secondly: According to the first definition, the
production costs are the price which the capitalist
pays for the manufacture of the commodity during the
process of production, therefore they are what the commodity
costs him. But what the production of a
commodity costs the capitalist and what the
production of the commodity itself costs, are two
entirely different things. The labour (both
materialised and immediate) which the capitalist pays
for the production of the commodity and the labour which is
necessary in order to produce the commodity are
entirely different. Their difference constitutes the
difference between the value advanced and the value earned;
between the purchase price of the commodity for the
capitalist and its selling price (that is, if it is sold at
its value). If this difference did not exist, then
neither money nor commodities would ever be transformed into
capital. The source of profit would disappear together
with the surplus-value. The production costs of the
commodity itself consist of the value of the capital
consumed in the process of its production, that is, the
quantity of materialised labour embodied in the commodity
plus the quantity of immediate labour which is
expended upon it. The total amount of
“materialised” plus “immediate
labour” consumed in it constitutes the production
costs of the commodity itself. The commodity can
only be produced by means of the industrial consumption of
this quantity of materialised and immediate labour.
This is the pre-condition for its emergence out of the
process of production as a product, as a
commodity and even as a use-value. And no
matter how profit and wages may vary, these immanent
production costs of the commodity remain the same so long as
the technological conditions
of the real labour process remain the same, or,
what amounts to the same thing, as long as there is no
variation in the existing development of labour
productivity. In this sense, the production costs
of a commodity are equal to its value. The
living labour expended upon the commodity and the living
labour paid by the capitalist are two different
things. From the outset, therefore, the production
costs of a commodity to the capitalist (his advances) differ
from the production costs of the commodity itself,
its value. The excess of its value (that is, what the
commodity itself costs) over and above the value of the
capital expended (that is, what it costs the capitalist)
constitutes the profit which, therefore, results not from
selling the commodity above its value, but from selling it
above the value of the advances the capitalist made.

The production costs thus defined, the immanent
production costs of the commodity, which are equal to
its value, i.e., to the total amount of labour-time (both
objectified and immediate) required for its production,
remain the fundamental condition for its production and
remain unchangeable so long as the productive power of
labour remains unchanged.

Thirdly. I have however previously shown
that, in each separate branch of production or particular
occupation, the capitalist does not by any means sell his
commodities—which are also the product of a particular
trade, occupation or sphere of production—at the value
contained in them, and that, therefore, the amount of profit
is not identical with the amount of surplus-value, surplus
labour or unpaid labour embodied in the commodities he
sells. On the contrary, he can, on the average, only
realise as much surplus-value in the commodity as devolves
on it as the product of an aliquot part of the social
capital. If the social capital comes to 1,000 and the
capital in a particular ||789|
branch of production amounts to 100, and if the total amount
of surplus-value (hence of the surplus product in which that
surplus-value is embodied) equals 200, that is, 20 per cent,
then the capital of 100 in this particular branch of
production would sell its commodity for 120, whatever the
value of the commodity, whether it is 120, or less or more;
whether, therefore, the unpaid labour contained in his
commodity forms a fifth of the labour expended upon it or
not.

This is the cost-price, and when one speaks of
production costs in the proper sense (in the
economic, capitalist sense), then the term denotes the value
of the capital outlay plus the value of the average
profit.

It is clear that, however much the cost-price of an
individual commodity may diverge from its value, it is
determined by the value of the total product of the
social capital. It is through the equalisation of the
profits of the different capitals that they are connected
with one another as aliquot parts of the aggregate social
capital, and as such aliquot parts they draw dividends out
of the common funds of surplus-value (surplus product), or
surplus labour, or unpaid labour. This does not alter
in any way the value of the commodity; it does not alter the
fact that, whether its cost-price is equal to, or greater or
smaller than, its value, it [the commodity] can never be
produced without its value being produced, that is to
say, without the total amount of materialised and immediate
labour required for its production being expended upon
it. This quantity of labour, not only of paid, but of
unpaid labour, must be expended on it, and nothing in the
general relationship between capital and labour is altered
by the fact that in some spheres of production a part of the
unpaid labour is appropriated by “brother
capitalists” and not by the capitalist who puts the
labour in motion in that particular branch of
industry. Further, it is clear that whatever the
relation between the value and the cost-price of a
commodity, the latter will always change, rise or fall, in
accordance with the changes of value, that is to say, the
quantity of labour required for the production of the
commodity. It is furthermore clear that part of the
profit must always represent surplus-value, unpaid labour,
embodied in the commodity itself, because, on the basis of
capitalist production, every commodity contains more labour
than has been paid by the capitalist putting that labour in
motion. Some part of the profit may consist of labour
not worked up in a commodity produced in the particular
branch of industry, or resulting from the given sphere of
production; but, then, there is some other commodity,
resulting from some other sphere of production, whose
cost-price falls below its value, or in whose cost-price
less unpaid labour is accounted for, paid for, than is
contained in it.

It is clear, therefore, that although the cost-prices of
most commodities must differ from their values, and hence
the “costs of production” of these commodities
must differ from the total quantity of labour contained in
them, nevertheless, those costs of production and those
cost-prices are not only determined by the values of the
commodities and confirm the law of value instead of
contradicting it, but, moreover, that the very existence
of costs of production and cost-prices can be
comprehended only on the basis of value and its laws, and
becomes a meaningless absurdity without that premise.

At the same time one perceives how economists who, on the
one hand, observe the actual phenomena of competition and,
on the other hand, do not understand the relationship
between the law of value and the law of cost-price, resort
to the fiction that capital, not labour, determines the
value of commodities or rather that there is no such thing
as value.

||790| Profit enters into
the production costs of commodities; it is rightly
included in the “natural price” of commodities
by Adam Smith, because, in conditions of capitalist
production, the commodity—in the long run, on the
average—is not brought to the market if it does not
yield the cost-price, which is equal to the value of the
advances plus the average profit. Or, as Malthus puts
it—although he does not understand the origin of
profit, its real cause—because the profit, and
therefore the cost-price which includes it, is (on the basis
of capitalist production) a condition of the supply
of the commodity. To be produced, to be brought to the
market, the commodity must at least fetch that market price,
that cost-price to the seller, whether its own value be
greater or smaller than that cost-price. It is a
matter of indifference to the capitalist whether his
commodity contains more or less unpaid labour than other
commodities, if into its price enters as much of the general
stock of unpaid labour, or the surplus product in which it
is fixed, as every other equal quantity of capital will draw
from that common stock. In this respect, the
capitalists are “communists”. In
competition, each naturally tries to secure more than the
average profit, which is only possible if others secure
less. It is precisely as a result of this struggle
that the average profit is established.

A part of the surplus-value realised in profit, i.e.,
that part which assumes the form of interest on capital laid
out (whether borrowed or not), appears to the capitalist as
outlay, as production cost which he has as a
capitalist, just as profit in general is the
immediate aim of capitalist production. But in
interest (especially on borrowed capital), this appears also
as the actual precondition of his production.

At the same time, this reveals the significance of the
distinction between the phenomena of production and of
distribution. Profit, a phenomenon of distribution, is
here simultaneously a phenomenon of production, a condition
of production, a necessary constituent
part of the process of production. How
absurd it is, therefore, for John Stuart Mill and others to
conceive bourgeois forms of production as absolute, but the
bourgeois forms of distribution as historically relative,
hence transitory. I shall return to this later.
The form of production is simply the form of distribution
seen from a different point of view. The specific
features—and therefore also the specific
limitation—which set bounds to bourgeois distribution,
enter into bourgeois production itself, as a determining
factor, which overlaps and dominates production. The
fact that bourgeois production is compelled by its own
immanent laws, on the one hand, to develop the productive
forces as if production did not take place on a narrow
restricted social foundation, while, on the other hand, it
can develop these forces only within these narrow limits, is
the deepest and most hidden cause of crises, of the crying
contradictions within which bourgeois production is carried
on and which, even at a cursory glance, reveal it as only a
transitional, historical form.

This is grasped rather crudely but none the less
correctly by Sismondi, for example, as a contradiction
between production for the sake of production and
distribution which makes absolute development of
productivity impossible.

2. James Mill [Futile Attempts to Resolve the
Contradictions of the Ricardian System]

Mill was the first to present Ricardo’s theory in
systematic form, even though he did it only in rather
abstract outlines. What he tries to achieve is formal,
logical consistency. The disintegration of the
Ricardian school “therefore” begins with
him. With the master what is new and significant
develops vigorously amid the “manure” of
contradictions out of the contradictory phenomena. The
underlying contradictions themselves testify to the richness
of the living foundation from which the theory itself
developed. It is different with the disciple.
His raw material is no longer reality, but the new
theoretical form in which the master had sublimated
it. It is in part the theoretical disagreement of
opponents of the new theory and in part the often
paradoxical relationship of this theory to reality which
drive him to seek to refute his opponents and
explain away reality. In doing so, he entangles
himself in contradictions and with his attempt to solve
these he demonstrates the beginning disintegration of
the theory which he dogmatically espouses. On the
one hand, Mill wants to present bourgeois production as the
absolute form of production and seeks therefore to prove
that its real contradictions are only apparent ones.
On the other hand, [he seeks] to present the Ricardian
theory as the absolute theoretical form of this mode of
production and to disprove the theoretical contradictions,
both the ones pointed out by others and the ones he himself
cannot help seeing. Nevertheless in a way Mill
advances the Ricardian view beyond the bounds reached by
Ricardo. He supports the same historical interests as
Ricardo—those of industrial capital against landed
property—and he draws the practical conclusions
from the theory—that of rent for example—more
ruthlessly, against the institution of landed property which
he would like to see more or less directly transformed into
State property. This conclusion and this side of Mill
do not concern us here.

[a) Confusion of surplus-value with Profit]

Ricardo’s disciples, just as Ricardo himself, fail to
make a distinction between surplus-value and
profit. Ricardo only becomes aware of the
problem as a result of the different influence which the
variation of wages can exercise on capitals of different
organic composition (and he considers different organic
composition only with regard to the circulation
process). It does not occur to them that, even if one
considers not capitals in different spheres of production
but each capital separately, insofar as it does not
consist exclusively of variable capital, i.e., of capital
laid out in wages only, rate of profit and rate of
surplus-value are different things, that therefore profit
must be a more developed, specifically modified form of
surplus-value. They perceive the difference only
insofar as it concerns equal profits—average rate of
profit—for capitals in different spheres of production
and differently composed of fixed and circulating
ingredients. In this connection Mill only repeats in a
vulgarised form what Ricardo says in Chapter I, “On
Value” [Principles of Political Economy].
The only new consideration which occurs to him in relation
to this question is this:

Mill remarks that “time as such”
(i.e. not labour-time, but simply time) produces
nothing, consequently it does not produce
“value”. How does this fit in with the law
of value according to which capital, because it requires a
longer time for its returns
[to the manufacturer], yields, as Ricardo says, the same
profit as capital which employs more immediate labour but
returns more rapidly? One perceives that Mill deals
here only with a quite individual case which, expressed in
general terms, would read as follows. How does the
cost-price, and the average rate of profit which it
presupposes ||792 | (and
therefore also equal value of commodities containing very
unequal quantities of labour), fit in with the fact that
profit is nothing but a part of the labour-time contained in
the commodity, the part which is appropriated by the
capitalist without an equivalent? On the other hand,
in the case of the average rate of profit and cost-price,
criteria which are quite extrinsic and external to the
determination of value are advanced, for example, that the
capitalist whose capital takes longer to make its return
because, as in the case of wine, it must remain longer in
the production process (or, in other cases, longer in the
circulation process) must be compensated for the time in
which he cannot use his capital to produce value. But
how can the time in which no value is produced create
value?

Mill’s passage concerning “time”
reads:

“… time does nothing.[e] How then can it create
value? [f] Time
is a mere abstract term. It is a word, a sound.
And it is the very same logical absurdity, to talk of an
abstract unit measuring value, and of time creating
it” (Elements of Political Economy, second ed.,
London, 1824, p. 99).

In reality, what is involved in the grounds for
compensation between capitals in different spheres of
production is not the production of surplus-value, but its
division between different categories of
capitalists. Viewpoints are here advanced which
have nothing whatever to do with the determination of
value as such. Everything which compels capital in
a particular sphere of production to renounce conditions
which would produce a greater amount of surplus-value
in other spheres, is regarded here as grounds for
compensation. Thus, if more fixed and less
circulating capital is employed, if more constant than
variable capital is employed, if it must remain longer in
the circulation process, and finally, if it must remain
longer in the production process without being subjected to
the labour process—a thing which always happens when
breaks of a technological character occur in the production
process in order to expose the developing product to the
working of natural forces, for example, wine in the
cellar. Compensation ensues in all these cases and
the last mentioned is the one which Mill seizes on, thus
tackling the difficulty in a very circumscribed and isolated
way. A part of the surplus-value produced in other
spheres is transferred to the capitals more unfavourably
placed with regard to the direct exploitation of labour,
simply in accordance with their size (competition brings
about this equalisation so that each separate capital
appears only as an aliquot part of social capital).
The phenomenon is very simple as soon as the relationship of
surplus-value and profit as well as the equalisation of
profit in a general rate of profit is understood. If,
however, it is to be explained directly from the law of
value without any intermediate link, that is, if the profit
which a particular capital yields in a particular branch of
production is to be explained on the basis of the
surplus-value contained in the commodities it produces, in
other words on the basis of the unpaid labour
(consequently also on the basis of the labour directly
expended in the production of the commodities), this is a
much more difficult problem to solve than that of squaring
the circle, which can be solved algebraically. It is
simply an attempt to present that which does not exist as in
fact existing. But it is in this direct form
that Mill seeks to solve the problem. Thus no solution
of the matter is possible here, only a sophistic explaining
away of the difficulty, that is, only
scholasticism. Mill begins this process.
In the case of an unscrupulous blockhead like
McCulloch, this manner assumes a swaggering
shamelessness.

Mill’s solution cannot be better summed up than it is in
the words of Bailey:

“The author[g] […] has made a curious
attempt to resolve the effects of time into
expenditure of labour. ‘If,’ says
he,” (p. 97 of the Elements, second ed., 1824)
“‘the wine which is put in the cellar is
increased in value one-tenth by being kept a year, one-tenth
more of labour may be correctly considered as having
been expended upon it.’… a fact can be
correctly considered as having taken ||793| place only when it really has
taken place. In the instance adduced, no human being,
by the terms of the supposition, has approached the wine, or
spent upon it a moment or a single motion of his
muscles” ([Samuel Bailey,] A Critical Dissertation
on the Nature, Measures, and Causes of Value etc.,
London, 1825, pp. 219-20).

Here the contradiction between the general law and
further developments in the concrete circumstances is to be
resolved not by the discovery of the connecting links but by
directly subordinating and immediately adapting the concrete
to the abstract.

This moreover is to be brought about by a verbal
fiction, by changing the correct names of things.
(These are indeed “verbal disputes”, they are
“verbal”, however, because real contradictions
which are not resolved in a real way, are to be solved by
phrases.) When we come to deal with McCulloch, it will
be seen that this manner, which appears in Mill only in
embryo, did more to undermine the whole foundation of the
Ricardian theory than all the attacks of its opponents.

Mill resorts to this type of argument only when he is
quite unable to find any other expedient. But as a
rule his method is quite different. Where the economic
relation—and therefore also the categories expressing
it—includes contradictions, opposites, and likewise
the unity of the opposites, he emphasises the aspect of the
unity of the contradictions and denies the
contradictions. He transforms the unity of
opposites into the direct identity of opposites.

For example, a commodity conceals the contradiction of
use-value and exchange-value. This contradiction
develops further, presents itself and manifests itself in
the duplication of the commodity into commodity and
money. This duplication appears as a process in the
metamorphosis of commodities in which selling and buying are
different aspects of a single process and each act of this
process simultaneously includes its opposite. In the
first part of this work, I mentioned that Mill disposes of
the contradiction by concentrating only on the unity
of buying and selling; consequently he transforms
circulation into barter, then, however, smuggles categories
borrowed from circulation into [his description of]
barter. See also what I wrote there about Mill’s
theory of money, in which he employs similar
methods.

In James Mill we find the unsatisfactory
divisions—“Production”,
“Distribution”, “Interchange”,
“Consumption”.

[b) Mill’s Vain Efforts to Bring the Exchange Between
Capital and Labour into Harmony with the Law of Value]

Wages:

“Instead, however, of waiting till
the commodity is produced, and […] the value of it is
realised, it has been found to suit much better the
convenience of the labourers to receive their share in
advance. The shape under which it has been found
most convenient for all parties that they should receive it,
is that of wages. When the share of the commodity
which belongs to the labourer has been all received in the
shape of wages, the commodity itself belongs to the
capitalist, he having, in reality, bought the share of
the
labourer and paid for it in advance” ( [James Mill,
Elements of Political Economy, second ed., 1824,
p. 41] Elémens d’économie politique,
traduit de l’anglais par J. T. Parisot, Paris, 1823, pp.
33-34).[h]

It is highly characteristic of Mill that, just as
money for him is an expedient invented for
convenience’ sake, capitalist relations are likewise
invented for the same reason. These specific social
relations of production are invented for
“convenience’” sake. Commodities and money
are transformed into capital because the worker has ceased
to engage in exchange as a commodity producer and commodity
owner; instead of selling commodities he is compelled to
sell his labour itself (to sell directly his labour-power)
as a commodity to the owner of the objective conditions of
labour. This separation is the prerequisite for the
relationship of capital and wage-labour in the same way as
it is the prerequisite for the transformation of money (or
of the commodities by which it is represented) into
capital. Mill presupposes the separation, the
division; he presupposes the relationship of
capitalist and wage-worker, in order to present as a matter
of convenience the situation in which the worker sells no
product, no commodity, but his share of the product
(in the production of which he has no say whatsoever and
which proceeds independently of him) before he has
produced it. ||794| Or,
more precisely, the worker’s share of the product is paid
for—transformed into money—by the capitalist
before the capitalist has disposed of, or realised, the
product in which the worker has a share.

This view is aimed at circumventing the specific
difficulty, along with the specific form of the
relationship. Namely, the difficulty of the Ricardian
system according to which the worker sells his labour
directly (not his labour-power). The [difficulty can
be expressed as follows]: the value of a commodity is
determined by the labour-time required for its production;
how does it happen that this law of value does not hold good
in the greatest of all exchanges, which forms the foundation
of capitalist production, the exchange between capitalist
and labourer? Why is the quantity of materialised
labour received by the worker as wages not equal to the
quantity of immediate labour which he gives in exchange for
his wages? To shift this difficulty, Mill transforms
the labourer into a commodity owner who sells the
capitalist his product, his commodity—since
his share of the product, of the commodity, is
his product, his commodity, in other words, a
value produced by him in the form of a particular
commodity. He resolves the difficulty by transforming
the transaction between capitalist and labourer, which
includes the contradiction between materialised and
immediate labour, into a common transaction between
commodity owners, owners of materialised labour.

Although by resorting to this artifice Mill has indeed
made it impossible for himself to grasp the specific nature,
the specific features, of the proceedings which take place
between capitalist and wage-worker, he has not reduced the
difficulty in any way, but has increased it, because the
peculiarity of the result is now no longer comprehensible in
terms of the peculiarity of the commodity which the worker
sells (and the specific feature of this commodity is that
its use-value is itself a factor of exchange-value, its use
therefore creates a greater exchange-value than it itself
contained).

According to Mill, the worker is a seller of commodities
like any other. For example, he produces 6 yards of
linen. Of these 6, 2 yards are assumed to be equal to
the value of the labour which he has added. He thus
sells 2 yards of linen to the capitalist. Why then
should he not receive the full value of the 2 yards, like
any other seller of 2 yards of linen, since he is now a
seller of linen like any other? The contradiction with
the law of value now expresses itself much more crassly than
before. He does not sell a particular commodity
differing from all other commodities. He sells labour
embodied in a product, that is, a commodity which as such is
not specifically different from any other commodity.
If now the price of a yard [of linen]—that is, the
quantity of money containing the same amount of labour-time
as the yard [of linen]—is 2 shillings, why then does
the worker receive 1 shilling instead of 2? But if the
worker received 2 shillings, the capitalist would not secure
any surplus-value and the whole Ricardian system would
collapse. We would have to return to profit upon
expropriation. The 6 yards would cost the capitalist
12 shillings, i.e., their value, but he would sell them for
13 shillings.

Or linen, and any other commodity, is sold at its value
when the capitalist sells it, but below its value
when the worker sells it. Thus the law of value would
be destroyed by the transaction between worker and
capitalist. And it is precisely in order to avoid this
that Mill resorts to his fictitious argument. He wants
to transform
the relationship between worker and capitalist into
the ordinary one between sellers and buyers of
commodities. But why should not the ordinary law of
value of commodities apply to this transaction? [It
may be said however that] the worker is paid “in
advance”. Consequently this is not after all
the ordinary relationship of buying and selling
commodities. What does this “payment in
advance” mean in this context? The worker who,
for example, is paid weekly, “advances”
his labour and produces the share of the weekly product
which belongs to him—his weekly labour embodied in a
product—(both according to Mill’s assumption and in
practice) before he receives “payment” from the
capitalist. The capitalist “advances” raw
materials and machines, the worker the “labour”,
and as soon as the wages are paid at the end of the week, he
sells a commodity, his commodity, his share of the
total commodity, to the capitalist. But, Mill will
say, the capitalist pays the 2 yards ||795| of linen due to the worker,
i.e., turns them into cash, transforms them into money,
before he himself sells the 6 yards and transforms them into
money. But what if the capitalist is working on
orders, if he sells the goods before he produces them?
Or to express it more generally, what difference does it
make to the worker—in this case the seller of 2 yards
of linen—if the capitalist buys these 2 yards from him
in order to sell them again, and not to consume them?
Of what concern are the buyer’s motives to the seller?
And how can motives, moreover, modify the law of
value? To be consistent, each seller would have to
dispose of his commodities below their value, for he is
disposing of his products to the buyer in the form of a
use-value, whereas the buyer hands over value in the form of
money, the cash form of the product. In this case, the
linen manufacturer would also have to underpay the
yarn merchant and the machine manufacturer and the colliery
owner and so on. For they sell him commodities which
he only intends to transform into money, whereas he pays
them “in advance” the value of the
component parts entering into his commodity not only before
the commodity is sold, but before it is even produced.
The worker provides him with linen, a commodity in a
marketable form, in contrast to other sellers whose
commodities, machinery, raw materials, etc., have to go
through a process before they acquire a saleable form.
It is a pretty kettle of fish for such an inveterate
Ricardian as Mill, according to whom purchase and sale,
supply and demand are identical terms, and money a mere
formality, if the transformation of the commodity into
money—and nothing
else takes place when the 2 yards of linen are sold to
the capitalist—includes the fact that the seller has
to sell the commodity below its value, and the buyer, with
his money, has to buy it above its value.

[Mill’s argument] therefore amounts to the absurdity
that, in this transaction, the buyer buys the commodity in
order to resell it at a profit and that, consequently, the
seller must sell the commodity below its
value—and with this the whole theory of value falls to
the ground. This second attempt by Mill to resolve a
Ricardian contradiction, in fact destroys the whole basis of
the system, especially its great merit that it defines the
relationship between capital and wage-labour as a direct
exchange between hoarded and immediate labour, that is, that
it grasps its specific features.

In order to extricate himself, Mill would have to go
further and to say that it is not merely a question of the
simple transaction of the purchase and sale of commodities;
that, on the contrary, insofar as it involves payment or the
turning into money of the worker’s product, which is equal
to his share of the total product, the relationship between
worker and capitalist is similar to that prevailing between
the lending capitalist or discounting capitalist (the
moneyed capitalist) and the industrial capitalist. It
would be a pretty state of affairs to presuppose
interest-bearing capital—a special form of
capital—in order to deduce the general form of
capital, capital which produces profit; that is, to present
a derived form of surplus-value (which already presupposes
capital) as the cause of the appearance of
surplus-value. In that case, moreover, Mill would have
to be consistent and in place of all the definite laws
concerning wages and the rate of wages elaborated by
Ricardo, he would have to derive them from the rate of
interest, and if he did that it would indeed be impossible
to explain what determines the rate of interest, since,
according to the Ricardians and all other economists worth
naming, the rate of interest is determined by the rate of
profit.

The proposition concerning the “share”
of the worker in his own product is in fact based on this:
If one considers not simply the isolated transaction between
capitalist and worker, but the exchange which takes place
between, both in the course of reproduction, and if one
considers the real content of this process instead of the
form in which it appears, then it is in fact evident that
what the capitalist pays the worker (as well as the part of
capital which confronts the worker as constant capital) is
nothing
but a part of the worker’s product itself and, indeed, a
part which does not have to be transformed into money, but
which has already been sold, has already been transformed
into money, since wages are paid in money, not in
kind. Under slavery, etc., the false appearance
brought about by the previous transformation of the product
into money—insofar as it is expended on
wages—does not arise; it is therefore obvious that
what the slave receives as wages is, in fact, nothing that
the slave-owner “advances” him, but simply the
portion of the realised labour of the slave that returns to
him in the form of means of subsistence. The same
applies to the capitalist. He “advances”
something only in appearance. Since he pays for the
work only after it has been done, he advances or rather
||796|pays the worker
as wages a part of the product produced by the worker and
already transformed into money. A part of the worker’s
product which the capitalist appropriates, which is
deducted beforehand, returns to the worker in the
form of wages—as an advance on the new product, if you
like.

It is quite unworthy of Mill to cling to this
appearance of the transaction in order to explain the
transaction itself (this sort of thing might suit McCulloch,
Say or Bastiat). The capitalist can advance the worker
nothing except what he has taken previously from the worker,
i.e., what has been advanced to him by other people’s
labour. Malthus himself says that what the capitalist
advances consists not “of cloth” and
“other commodities”, but “of
labour”, that is, precisely of that which he
himself does not perform. He advances the worker’s own
labour to the worker.

However, the whole paraphrase is of no use to Mill, for
it does not help him to avoid resolving the question: how
can the exchange between hoarded and immediate labour (and
this is the way the exchange process between capital and
labour is perceived by Ricardo and by Mill and others after
him) correspond to the law of value, which it contradicts
directly? One can see from the following passage that
it is of no help to Mill:

“What determines the share of
the labourer, or the portion in which the commodity, or
commodity’s worth, is divided between him and the
capitalist. Whatever the share of the labourer, such
is the rate of wages… It is very evident, that
the share of the two parties is the subject of a
bargain between them [&hellip] All bargains,
when left in freedom, are determined by competition, and the
terms alter according to the state of supply and
demand” ([Mill, Elements, pp. 41-42;
Parisot,] pp. 34-35).

The worker is paid for his “share” of the
product. This is said in order to transform him into
an ordinary seller of a commodity
(a product) vis-à-vis the capitalist and to
eliminate the specific feature of this relationship.
[According to Mill] the worker’s share of the product is
his product, that is, the share of the product in
which his newly applied labour is realised. But this
is not the case. On the contrary, we now ask which is
his “share” of the product, that is,
which is his product? For the part of
the product which belongs to him is his product,
which he sells. We are now told that his
product and his product are two quite different
things. We must establish, first of all, what his
product (in other words, his share of the product, that is,
the part of the product that belongs to him) is. His
product is thus a mere phrase, since the quantity of value
which he receives from the capitalist is not determined by
his own production. Mill has thus merely removed the
difficulty one step. He has got no farther than he was
at the beginning.

There is a quid pro quo here. Supposing that
the exchange between capital and wage-labour is a continuous
activity—as it is if one does not isolate and consider
one individual act or element of capitalist
production—then the worker receives a part of the
value of his product which he has replaced, plus that part
of the value which he has given the capitalist for
nothing. This is repeated continuously. Thus he
receives in fact continuously a portion of the value of his
own product, a part of, or a share in, the value he has
produced. Whether his wages are high or low is not
determined by his share of the product but, on the contrary,
his share of the product is determined by the amount of his
wages. He actually receives a share of the value of
the product. But the share he receives is determined
by the value of labour, not conversely, the value of
labour-by his share in the product. The value of
labour, that is, the labour-time required by the worker for
his own reproduction, is a definite magnitude; it is
determined by the sale of his labour power to the
capitalist. This virtually determines his share of the
product as well. It does not happen the other way
round, that his share of the product is determined first,
and as a result, the amount or value of his wages.
This is precisely one of Ricardo’s most important and most
emphasised propositions, for otherwise the price of labour
would determine the prices of the commodities it produces,
whereas, according to Ricardo, the price of labour
determines nothing but the rate of profit.

And how does Mill determine the “share” of
the product which the worker receives? By demand and
supply, competition between workers and capitalists.
What Mill says applies to all commodities:

“…It is
very evident, that the share” (read: in the value of
commodities) “of the two Parties” (seller and
buyer) “is the subject of a bargain between ||797| them […] All
bargains, when left in freedom, are determined by
competition, and the terms alter according to the state of
supply and demand” [Mill, Elements, pp. 41-42;
Parisot, pp. 34-35].

Here we have the gist of the matter. [This is said
by] Mill who, as a zealous Ricardian, proves that although
demand and supply can, to be sure, determine the
vacillations of the market price either above or below the
value of the commodity, they cannot determine that
value itself, that these are meaningless words when applied
to the determination of value, for the determination of
demand and supply presupposes the determination of
value. In order to determine the value of labour,
i.e., the value of a commodity, Mill now resorts to
something for which Say had already reproached Ricardo:
determination by demand and supply.

But even more.

Mill does not say which of the two parties represents
supply and which demand—which is of no importance to
the matter here. Still, since the capitalist offers
money and the worker offers something for the money, we will
assume that demand is on the side of the capitalist and
supply on that of the worker. But what then does the
worker “sell”? What does he supply?
His “share” of the product which does not [yet]
exist? But it is just his share in the future product
which has to be determined by competition between him and
the capitalist, by the “demand and supply”
relationship. One of the sides of this
relationship—supply—cannot be something which is
itself the result of the struggle between demand and
supply. What then does the worker offer for
sale? His labour? If this is so, then Mill is
back again at the original difficulty he sought to evade,
the exchange between hoarded and immediate
labour. And when he says that what is happening
here is not the exchange of equivalents, or that the value
of labour the commodity sold, is not measured by “the
labour-time” itself, but by competition, by demand and
supply, then he admits that Ricardo’s theory breaks down,
that his opponents are right, that the determination of the
value of commodities by labour-time is false, because the
value of the most important commodity, labour itself,
contradicts this law of value of commodities. As we
shall see later, Wakefield says this quite
explicitly.

Mill can turn and twist as he will, he cannot extricate
himself from the dilemma. At best, to use his own mode
of expression, competition causes the workers to offer a
definite quantity of labourfor a price which, according to the relation
of demand and supply, is equal to a larger or smaller part
of the product which they will produce with this quantity of
labour. That this price, this sum of
money, which they receive in this way, is equal to a
larger or smaller part of the value of the product to be
manufactured, does not, however, as a matter of course, in
any way prevent a definite amount of living labour
(immediate labour) from being exchanged for a greater or
lesser amount of money (accumulated labour, existing
moreover in the form of exchange-value). It does not
therefore prevent the exchange of unequal quantities of
labour, that is, of less hoarded labour for more immediate
labour. This was precisely the phenomenon that Mill
had to explain and he wished to clear the problem up without
violating the law of value. The phenomenon is not
changed in the slightest, much less explained, by declaring
that the proportion in which the worker exchanges his
immediate labour for money is expressed at the end of
the production process in the ratio of the value paid him to
the value of the product he has produced. The original
unequal exchange between capital and labour thus only
appears in a different form.

How Mill boggles at direct exchange between labour and
capital—which Ricardo takes as his point of departure
without any embarrassment at all—is also shown by the
way he proceeds. Thus he says:

||798| “Let us begin
by supposing that there is a certain number of capitalists
[…] that there is also a certain number of labourers;
and that the proportion, in which the commodities
produced ore divided between them, has fixed itself at some
particular point.”

“Let us next suppose that the
labourers have increased in number […] without any
increase in the quantity of capital… To
prevent their being left out of employment” the
additional labourers “have but one resource; they must
endeavour to supplant those who have forestalled the
employment; that is, they must offer to work for a
smaller reward. Wages, therefore,
decline. If we suppose … that the quantity of
capital has increased, while the number of labourers remains
the same, the effect will be reversed… if the
ratio which capital and population bear to one another
remains the same, wages will remain the same” ([Mill,
Elements, pp. 42-44 passim; Parisot,] p. 35 et seq.
passim).

What has to be determined is “the proportion in
which they” (capitalists and workers) “divide
the product”. In order to establish this by
competition, Mill assumes that this proportion
“has fixed itself at some particular
point”. In order to establish the
“share” of the worker by means of competition,
he assumesthat it is determined before competition “at
some particular point”. Moreover, in order to
demonstrate how competition alters the division of the
product which is determined “at some particular
point”, he assumes that workers “offer to
work for a smaller reward” when their number grows
more rapidly than the quantity of capital. Thus he
says here outright that what the workers supply consists of
“labour” and that they offer this labour
for a “reward”, i.e., money, a definite
quantity of “hoarded labour”. In order to
avoid direct exchange between labour and capital, direct
sale of labour, he has recourse to the theory of the
“division of the product”. And in order to
explain the proportion in which the product is divided, he
presupposes direct sale of labour for money, so that
this original exchange between capital and labour is later
expressed in the proportion of [the share] the worker
receives of his product, and not that the original exchange
is determined by his share of the product. And
finally, if the number of workers and the amount of capital
remain the same, then the “wage rate” will
remain the same. But what is the wage rate when
demand and supply balance? That is the point which has
to be explained. It is not explained by declaring that
this rate is altered when the equilibrium between
demand and supply is upset. Mill’s tautological
circumlocutions only demonstrate that he feels there is a
snag here in the Ricardian theory which he can only overcome
by abandoning the theory altogether.

***

Against Malthus, Torrens, and others,
against the determination of the value of commodities by the
value of capital, Mill remarks correctly:

“Capital is commodities.
If the value of commodities, then, depends upon the value of
capital, it depends upon the value of commodities; the value
of commodities depends upon itself” ([James Mill,]
Elements of Political Economy, London, 1821,
p. 74).

***

<Mill does not gloss over the contradiction between
capital and labour. The rate of profit must be
high so that the social class which is free from immediate
labour may be important; and for that purpose wages must be
relatively low. It is necessary that the mass of the
labourers should not be masters of their
own time and slaves of their own needs, so that human
(social) capacities can develop freely in the classes for
which the working class serves merely as a basis. The
working class represents lack of development in order that
other classes can represent human development. This in
fact is the contradiction in which bourgeois ||799| society develops, as has every
hitherto existing society, and this is declared to be a
necessary law, i.e., the existing state of affairs is
declared to be absolutely reasonable.

“All the blessings which flow from
that grand and distinguishing attribute of our nature, its
progressiveness, the power of advancing continually
from one degree of knowledge, one degree of command over the
means of happiness, to another, seem, in a great measure, to
depend upon the existence of a class of men which have
their time at their commend; that is, who are rich
enough to be freed from all solicitude with respect to the
means of living in a certain state of enjoyment. It is
by this class of men that knowledge is cultivated and
enlarged; it is also by this class that it is diffused; it
is this class of men whose children receive the best
education, and are prepared for all the higher and more
delicate functions of society, as legislators, judges,
administrators, teachers, inventors in all the arts, and
superintendents in all the more important works, by which
the dominion of the human species is extended over the
powers of nature… to enable a considerable
proportion of the community to enjoy the advantages of
leisure, the return to capital must
evidently be large” ([James Mill,
Elements, pp. 64-65, 65-66; Parisot,] pp. 65,
67).>

***

In addition to the above.

Mill, as a Ricardian, defines labour and capital simply
as different forms of labour.

“… of these two species of
labour, two things are to be observed … they are
not always paid according to the same rate”
([James Mill, Elements, p.100;] Parisot, p.100).

Here he comes to the point. Since what pays for
immediate labour is always hoarded labour, capital, the fact
that it is not paid at the same rate means nothing
more than that more immediate labour is exchanged for less
hoarded labour, and that this is “always”
the case, since otherwise hoarded labour would not be
exchanged as “capital” for immediate labour and
would not
only fail to yield the very high interest desired
by Mill, but would yield none at all. The passage
quoted thus contains the admission (since Mill along with
Ricardo regards the exchange between capital and labour as a
direct exchange of hoarded and immediate labour), that they
are exchanged in unequal proportions, and that in
respect of them the law of value—according to which
equal quantities of labour are exchanged for one
another—breaks down.

[c) Mill’s Lack of Understanding of the Regulating Role
of Industrial Profit]

Mill advances as a basic law what Ricardo actually
assumes in order to develop his theory of rent.

“All other profits … must sink
to the level of agricultural profits” (
[Elements,] second ed., London, 1824, p. 78).

This is fundamentally wrong, since capitalist production
develops first of all in industry, not in agriculture, and
only embraces the latter by degrees, so that it is only as a
result of the advance of capitalist production that
agricultural profits become equalised to industrial profits
and only as a result of this equalisation do the former
influence the latter. Hence it is in the first place
wrong historically. But secondly, once this
equalisation is an accomplished fact—that is,
presupposing a level of development of agriculture in which
capital, in accordance with the rate of profit, flows from
industry to agriculture and vice versa—it is equally
wrong to state that from this point on agricultural
profits become the regulating force, instead of the
influence being reciprocal. Incidentally, in order to
develop the concept of rent, Ricardo himself assumes the
opposite. The price of corn rises; as a result
agricultural profits do not fall (as long as
there are no new supplies either from inferior land or from
additional, less productive investments of
capital)—for the rise in the price of corn more than
compensates the farmer for the loss he incurs by the rise in
wages following on the rise in the price of corn—but
profits fail in industry, where no such compensation
or over-compensation takes place. Consequently the
industrial profit rate falls and capital which yields
this lower rate of profit can therefore be employed on
inferior lands. This would not be the case if the old
profit rate prevailed. Only because the decline of
industrial profits thus reacts on the agricultural profit
yielded by the worse land, does agricultural profit
generally fall, ||800|and a part of it is detached in the form of rent from the
profit the better land yields. This is the way Ricardo
describes the process, according to which, therefore,
industrial profit regulates profit in agriculture.

If agricultural profits were to rise again as a result of
improvements in agriculture, then industrial profits would
also rise. But this does not by any means exclude the
fact that—as originally the decline in industrial
profit causes a decline in agricultural profit—a
rise in industrial profit may bring about a rise in
agricultural profit. This is always the case when
industrial profit rises independently of the price of
corn and of other agricultural necessaries which enter
into the wages of the workers, that is, when it rises as a
result of the fall in the value of commodities which
constitute constant capital, etc. Rent moreover cannot
possibly be explained if industrial profit does not
regulate agricultural profit. The average rate of
profit in industry is established as a result of
equalisation of the profits of the different capitals and
the consequent transformation of the values into
cost-prices. These cost-prices—the value
of the capital advances plus average profit—are the
prerequisite received by agriculture from industry,
since the equalisation of profits cannot take place in
agriculture owing to landownership. If then the value
of agricultural produce is higher than the cost-price
determined by the industrial average profit would be,
the excess of this value over the cost-price constitutes the
absolute rent. But in order that this excess of value
over cost-price can be measured, the cost-price must
be the primary factor; it must therefore be imposed on
agriculture as a law by industry.

***

A passage from Mill must be noted:

“That which is productively
consumed is always capital. This is a property of
productive consumption which deserves to be particularly
marked… Whatever is consumed productively
becomes capital” ([James Mill, Elements,
p. 217;] Parisot, pp. 241-42).

[d)] Demand, supply, Over-Production

“A demand means, the will to
purchase, and the means of
purchasing… The equivalent” (means of
purchasing) “which a man brings is the
instrument of demand. The extent of his demand
is measured by the extent of his equivalent. The
demand and the equivalent are convertible terms,
and one may be substituted for the other…
His” (a man’s) “will, therefore, to
purchase, and his means of purchasing, in
other words his demand, is exactly equal to the amount of
what he has produced and does not mean to consume”
([James Mill, Elements, pp. 224-25;] Parisot,
pp. 252-53).

One sees here how the direct identity of demand and
supply (hence the impossibility of a general glut) is
proved. The product constitutes demand and the extent
of this demand, moreover, is measured by the value of the
product. The same abstract “reasoning”
with which Mill demonstrates that buying and selling are but
identical and do not differ; the same tautological phrases
with which he shows that prices depend on the amount of
money in circulation; the same methods used to prove that
supply and demand (which are only more developed forms of
buyer and seller) must balance each other. The logic
is always the same. If a relationship includes
opposites, it comprises not only opposites but also the
unity of opposites. It is therefore a unity
without opposites. This is Mill’s logic, by which
he eliminates the “contradictions”.

Let us begin with supply. What I supply is
commodities, a unity of use-value and exchange-value,
for example, a definite quantity of iron worth £3
(which is equal to a definite quantity of
labour-time). According to the assumption I am a
manufacturer of iron. I supply a
use-value—iron—and I supply a value, namely, the
value expressed in the price of the iron, that is, in
£3. But there is the following little
difference. A definite quantity of iron is in
reality placed on the market by me. The
value of the iron, on the other hand, exists only as
its price which must first be realised by the buyer
of the iron, who represents, as far as I am concerned, the
demand for iron. The demand of the seller of
iron consists in the demand for the exchange-value of
the iron, which, although it is embodied in the iron, is not
realised. It is possible for the same
exchange-value to be represented by very different
quantities of iron. The supply of use-value and the
supply of value to be realised are thus by no means
identical, since quite different quantities of use-value
||801| can represent the same
quantity of exchange-value.

The same value—£3—can be represented by
one, three or ten tons of iron. The quantity of iron
(use-value) which I supply and the quantity of value I
supply, are by no means proportionate to one another, since
the latter quantity can remain unchanged no matter how much
the former changes. No matter how large or small the
quantity of iron I supply may be, it is assumed that
I always want to realise the value of the iron, which is
independent of the actual quantity of iron and in
general of its existence as a use-value. The value
supplied (but not yet realised) and the quantity of iron
which is realised, do not correspond to each other. No
grounds exist therefore for assuming that the possibility of
selling a commodity at its value corresponds in any way to
the quantity of the commodity I bring to market. For
the buyer, my commodity exists, above all, as
use-value. He buys it as such. But what he needs
is a definite quantity of iron. His need for iron is
just as little determined by the quantity produced by me as
the value of my iron is commensurate with this quantity.

It is true that the man who buys has in his possession
merely the converted form of a
commodity—money—i.e., the commodity in the form
of exchange-value, and he can act as a buyer only because he
or others have earlier acted as sellers of commodities which
now exist in the form of money. This, however, is no
reason why he should reconvert his money into my commodity
or why his need for my commodity should be determined by the
quantity of it that I have produced. Insofar as he
wants to buy my commodity, he may want either a smaller
quantity than I supply, or the entire quantity, but
below its value. His demand does not have to
correspond to my supply any more than the quantity I supply
and the value at which I supply it are identical.

However, the inquiry into demand and supply does not
belong here.

Insofar as I supply iron, I do not demand iron, but
money. I supply a particular use-value and demand its
value. My supply and demand are therefore as different
as use-value and exchange-value. Insofar as I supply a
value in the iron itself, I demand the realisation
of this value. My supply and demand are thus as
different as something conceptual is from something
real. Further, the quantity I supply and its value
stand in no proportion to each other. The demand for
the quantity of use-value I supply is however measured not
by the value I wish to realise, but by the quantity which
the buyer requires at a definite price.

Yet another passage from Mill:

“But it is evident, that each man
contributes to the general supply the whole of what he has
produced and does not mean to consume. In whatever
shape any part of the annual produce has come into his
hands, if he proposes to consume no part of it himself, he
wishes to dispose of the whole; and the whole, therefore,
becomes matter of supply: if he consumes a part, he wishes
to dispose of all the rest, and all the rest becomes matter
of supply” ([James Mill, Elements, p. 225;]
Parisot, p. 253).

In other words, this means nothing else but that all
commodities placed on the market constitute supply.

“As every man’s demand, therefore, is
equal to that part of the annual produce, or of the property
generally, which he has to dispose of”

<Stop! His demand is equal to the value
(when it is realised) of the portion of products which he
wants to dispose of. What he wants to dispose of is a
certain quantity of use-value; what he wishes to have is the
value of this use-value. Both things are
anything but identical>

“and each man’s supply is exactly the
same thing”

<by no means; his demand does not consist in what he
wishes to dispose of, i.e., the product, but in the demand
for the value of this product; on the other hand, his supply
really consists of this product, whereas the value is only
conceptually supplied>

(That is, the value of the commodity supplied by
him and the value which he asks for it but does not
possess are equal; provided he sells the commodity at
its value, the value supplied (in the form of commodity) and
the value received (in the form of money) are equal.
But it does not follow that, because he wants to sell the
commodity at its value, he actually does so. A
quantity of commodities is supplied by him, and is on the
market. He tries to get the value for it.)

“Demand and supply are terms ||802| related in a peculiar
manner. A commodity which is supplied, is always, at
the same time, a commodity which is the instrument of
demand. A commodity which is the instrument of demand,
is always, at the same time, a commodity added to the stock
of supply. Every commodity is always at one and the
same time matter of demand and matter of supply.
Of two men who perform an exchange, the one does not come
with only a supply, the other with only a demand; each of
them comes with both a demand and a supply. The
supply which he brings is the instrument of his
demand; and his demand and supply are of course exactly
equal to one another.”

“But if the demand and supply of
every individual are always equal to one another, and demand
and supply of all the individuals in the nation, taken
aggregately, must be equal. Whatever, therefore, be
the amount of the annual produce, it never can exceed the
amount of the annual demand. The whole of the annual
produce is divided into a number of shares equal to that of
the people to whom it is distributed. The whole of the
demand is equal to as much of the whole of the shares as the
owners do not keep for their own
consumption. But the whole of the shares is equal to
the whole of the produce” ([James Mil],
Elements, pp. 226-27;] Parisot, pp. 254-55).

Once Mill has assumed that supply and demand are
equal for each individual, then the whole long-winded
excursus to the effect that supply and demand are also equal
for all individuals, is quite superfluous.

***

How Mill was regarded by contemporary Ricardians can be
seen, for instance, from the following:

“… to give a strictly
logical deduction of the principles of Political
Economy…. Mr. Mill touches on almost every
topic of discussion: He has disentangled and simplified the
most complex and difficult questions; has placed the various
principles which compose the science in their natural
order” (op. cit., p. 88[i]).

One can conclude from his logic that he takes over the
quite illogical Ricardian structure, which we analysed
earlier, and naïvely regards it on the whole as a
“natural order”.

[e)] Prévost [Rejection of some of the
Conclusions of Ricardo and James Mill. Attempts to
Prove That a Constant Decrease of Profit Is Not
Inevitable]

As far as the above-mentioned Prévost is
concerned, who made Mill’s exposition of the Ricardian
system the basis of his Réflexions, a number
of his objections are founded on sheer, callow
misunderstanding of Ricardo.

But the following remark about rent is noteworthy:

“One may entertain a doubt about the
influence of inferior land on the determination of
prices, if one bears in mind, as one should, its relative
area” (Prévost, op. cit., p. 177).

Prévost cites the following from Mill,
which is also important for my argument, since Mill himself
here thinks of one example
wheredifferential rent arises because the new
demand, the additional demand, is supplied by a better, not
a worse soil, consequently, the ascending line.

“Mr. Mill uses this
comparison: Suppose that all the land cultivated in the
country were of one uniform quality, and yielded the same
return to every portion of the capital employed upon it,
with the exception of one acre: that acre, we shall suppose,
yields six times as much as any other acre (Mill,
Elements, second ed., p. 71). It is
certain—as Mr. Mill demonstrates—that the farmer
who rents this last acre, cannot increase his rent”
(that is, cannot make a higher profit than the other
farmers; it is very badly expressed) “and that
five-sixths of the product will go to the
landowner.”

(Thus there is here differential rent without the
lowering of the rate of profit and without any increase in
the price of agricultural products) (this must happen all
the more frequently, since the situation||803| must improve
continuously with the industrial development of the country,
the growth of its means of communication and the increase in
population, irrespective of the natural fertility, and the
relatively better location has the same effect as [greater]
natural fertility.)

“But had the ingenious author thought
of making a similar supposition in the opposite case, he
would have realised that the result would be
different. Let us suppose that all the land was of
equal quality with the exception of one acre of inferior
land. The profit on the capital on this single acre
amounted to one-sixth of the profit yielded by every other
acre. Does he believe that the profit on several
million acres would be reduced to one-sixth of their
accustomed level? It is probable that this solitary
acre would have no effect at all, because the various
products (particularly corn), when they come onto the
market, would not be markedly affected by such a
minute amount. That is why we say that the
assertions of Ricardo’s supporters about the effect of
inferior soil should be modified by taking the relative
areas of land of different quality into account”
(Prévost, loc. cit., pp. 177-78).

***

<Say, in his notes to Ricardo’s book translated
by Constancio, makes only one correct remark about
foreign trade. Profit can also be made by
cheating, one person gaining what the other loses.
Loss and gain within a single country cancel each
other out. But not so with trade between different
countries. And even according to Ricardo’s theory,
three days of labour of one country can be exchanged against
one of another country—a point not noted by
Say. Here the law of value undergoes essential
modification. The relationship between labour days of
different countries may be similar to that existing between
skilled, complex labour and unskilled, simple labour within
a country. In
this case, the richer country exploits the poorer one,
even where the latter gains by the exchange, as John Stuart
Mill explains in his Some Unsettled
Questions.>

***

[Prévost says the following about the relationship
between agricultural and industrial profit:]

“We admit that, in general, the rate
of agricultural profit determines that of industrial
profit. But at the same time we must point out that
the latter also reacts of necessity on the former. If
the price of corn rises to a certain point, industrial
capitals turn to agriculture, and necessarily depress
agricultural profits” (loc. cit., p. 179).

The point is correct, but is conceived in a much too
limited sense. See above.[j]

The Ricardians insist that profit can fall only as a
result of a rise in wages, because necessaries rise in price
with [the growth of] population, this, however, is a
consequence of the accumulation of capital, since inferior
soils are cultivated as a result of this accumulation.
But Ricardo himself admits that profits can also fall when
capitals increase faster than population, when the
competition of capitals causes wages to rise. This
[corresponds to] Adam Smith’s theory. Prévost
says:

“When the growing demand of the
capitals increases the price of the labourer, that is,
wages, does it not then appear that there are no
grounds for asserting that the growing supply of these
selfsame capitals never causes the price of capitals, in
other words, profit, to fall?” (op. cit.,
p. 188.)

Prévost builds on the false Ricardian
foundation which can only explain falling profits as a
result of decreasing surplus-value, and therefore decreasing
surplus labour, and consequently as a result of greater
value or rising cost of the necessaries consumed by the
worker, that is, increasing value of labour, although
the real wages of the labourer may not rise but decline; on
this basis he seeks to prove that a continual decline in
profits is not inevitable.

He says first:

“To begin with, the state of
prosperity increases profits”

(namely, agricultural profits, for the population
increases with the state of prosperity, the demand for
agricultural produce
therefore grows and consequently the farmer makes
additional profits)

“and this happens long before new
land is taken into cultivation. The increased area
under cultivation does indeed affect rent and decreases
profits. But although profit is thus directly
decreased, it still remains as high as before the
advance… Why is the cultivation of land of
inferior quality undertaken at certain times? It is
undertaken in the expectation of a profit which is at
least equal to the customary profit. And what
circumstance can lead to the realisation of such a profit on
this kind of land? Increase ||804| of population. It
presses on … the existing means of subsistence,
thereby raising the prices of food (especially of corn) so
that agricultural capitals obtain high profits. The
other capitals pour into agriculture, but since the soil is
limited in area, this competition has its limits and the
point is reached when even higher profits can be made
than in trade or manufacture through the cultivation of
inferior soils. If there is a sufficient area of
inferior land available, then agricultural profit must be
adjusted to the last capitals applied to the land. If
one proceeds from the rate of profit prevailing at the
beginning of the increasing prosperity” (division of
profit into profit and rent), “then it will be found
that profit has no tendency to decline. It rises with
the increase in the population until agricultural profit
rises to such a degree that it can suffer a considerable
reduction as a result of the cultivation [of new land]
without ever sinking below its original rate, or, to be more
precise, below the average rate determined by various
circumstances” (op. cit., pp. 190-92).

Prévost obviously misunderstands the Ricardian
view. As a result of prosperity, the population
increases, thus raising the price of agricultural products
and hence agricultural profits. (Although it is not
easy to see why, if this rise is constant, rents should not
be increased after the leases run out and why these
additional agricultural profits should not be collected in
the form of rent even before the inferior land is
cultivated.) But the same rise in [the price of]
agricultural produce which causes agricultural profits to go
up, increases wages in all industries and consequently
brings about a fall in industrial profits. Thus a new
rate of profit arises in industry. If at the existing
market prices the inferior lands even pay only this lower
rate of profit, capitals can be transferred to the
inferior land. They will be attracted to it by the
high agricultural profits and the high market price of
corn. As Prévost says, they may, before a
sufficient amount of capital has been transferred, even
yield higher profits than the industrial profits, which have
declined. But as soon as the additional supply is
adequate, the market price falls, so that the inferior soils
only yield the ordinary industrial profit. The
additional amount yielded by the product of the better
[soils] is converted into rent. This is the Ricardian
conception, whose
basic premises are accepted by Prévost and
from which he reasons. Corn is now dearer than it was
before the rise in agricultural profit. But the
additional profit which it brought the farmer is transformed
into rent. In this way, therefore, profit also
declines on the better land to the lower rate of industrial
profit brought about by the rise in the price of
agricultural produce. There is no reason for assuming
that as a consequence profits do not have to fall below
their “original rate” if no other modifying
circumstances intervene. Other circumstances
may, of course, intervene. According to the
assumption, after the increase in the price of necessaries,
agricultural profit is in any case higher than industrial
profit. If, however, as a result of the development of
productive power, the part of the workers’ necessaries
supplied by industry has fallen to such a degree that wages
(even though they are paid at their average value) do not
rise as much as they would have done without the
intervention of these paralysing circumstances,
proportionally to the increased [price of] agricultural
produce; if, furthermore, the same development of productive
power has reduced the prices of the products of the
extractive industries, and also of agricultural raw
materials which are not used as food (although the
supposition is not very likely), industrial profit need not
fall, though it would be lower than agricultural
profit. A decline of the latter as a result of a
transfer of capital to agriculture and the building-up of
rent, ||805| would only restore
the old rate of profit.

[Secondly,] Prévost tries a different
approach.

“Soils of inferior quality …
are only put into cultivation if they yield profits as high
as—or even higher than—the profit yielded by
industrial capitals. Under these conditions, the price
of corn or of other agricultural products often remains very
high despite the newly cultivated land. These high
prices press on the working population, since rises in wages
do not correspond exactly to rises in the prices of the
goods used by workers. They are more or less a burden
to the whole population, since nearly all commodities are
affected by the rise in wages and in the prices of essential
goods. This general pressure, linked with the
increasing mortality brought about by too large a
population, results in a decline in the number of
wage-workers and, consequently, in a rise in wages and a
decline in agricultural profits. Further development
now proceeds in the opposite direction to that taken
previously. Capitals are withdrawn from the inferior
soils and reinvested in industry. But the population
principle soon begins to operate once again. As soon
as poverty has been ended, the number of workers increases,
their wages decline, and profits rise as a
consequence. Such fluctuations follow one another
repeatedly without bringing about a change in the average
rate of profit. Profit may decline or rise for other
reasons or as a result of these causes; it may alternately
go up and down, and yet it may not be possible
to attribute the average rise or fall to the necessity
for cultivating new soils. The population is the
regulator which establishes the natural order and keeps
profit within certain limits” (op. cit.,
pp. 194-96).

Although confused, this is correct according to the
“population principle”. It is however not
in line with the assumption that agricultural profits rise
until the additional supply required by the population has
been produced. If this presupposes a constant increase
in the prices of agricultural produce, then it leads not to
a decrease in population, but to a general lowering of the
rate of profit, hence of accumulation, and, consequently, to
a decrease of population. According to the
Ricardian-Malthusian view, the population would grow more
slowly. But Prévost’s basis is: that the
process would depress wages below their average level, this
fall in wages and the poverty of the workers causes the
price of corn to fall and hence profits to rise again.

This latter argument, however, does not belong here, for
here it is assumed that the value of labour is always paid;
that is, that the workers receive the means of subsistence
necessary for their reproduction.

This [exposition] of Prévost is important, because
it demonstrates that the Ricardian view—along with the
view he adopted from Malthus—can indeed explain
fluctuations in the rate of profit, but cannot explain
(constant) falls in the same without repercussions, for upon
reaching a certain level the rise in corn prices and the
drop in profit would force wages below their level, bringing
about a violent decrease in the population, and therefore a
fall in the prices of corn and other necessaries, and this
would lead again to a rise in profits.

3. Polemical Writings

||806| The period between
1820 and 1830 is metaphysically speaking the most important
period in the history of English political
economy—theoretical tilting for and against the
Ricardian theory, a whole series of anonymous polemical
works, the most important of which are quoted here,
especially in relation to those matters which concern our
subject. At the same time, however, it is a
characteristic of these polemical writings that all of them,
in actual fact, merely revolve around the definition of the
concept of value and its relation to capital.

a) [“Observations on certain Verbal
Disputes”. Scepticism in Political Economy]

Observations on certain Verbal Disputes in Political
Economy, particularly relating to Value, and to Demand and
Supply, London, 1821.

This is not without a certain acuteness. The title
Verbal Disputes is characteristic.

Directed in part against Smith and Malthus, but also
against Ricardo.

The real sense of this work lies in the following:

“… disputes … are
entirely owing to the use of words in different senses by
different persons; to the disputants looking, like the
knights in the story, at different sides of the
shield” (Observations etc., London, 1821,
pp. 59-60).

This kind of scepticism always heralds the dissolution of
a theory, it is the harbinger of a frivolous and
unprincipled eclecticism designed for domestic use.

First of all in relation to Ricardo’s theory of
value:

“There is an obvious difficulty in
supposing that labour is what we mentally allude to,
when we talk of value or of real price, as opposed to
nominal price; for we often want to speak of the value or
price of labour itself. Where by labour, as the
real price of a thing, we mean the labour which
produced the thing, there is another difficulty
besides; for we often want to speak of the value or price
of land; but land is not produced by labour. This
definition, then, will only apply to
commodities” (op. cit., p. 8).

As far as labour is concerned, the objection to Ricardo
is correct insofar as he presents capital as the purchaser
of immediate labour and consequently speaks directly of the
value of labour, while what is bought and sold is the
temporary use of labour-power, itself a product.
Instead of the problem being resolved, it is only emphasised
here that a problem remains unsolved.

It is also quite correct that “the value or
price of land”, which is not produced by
labour, appears directly to contradict the concept of value
and cannot be derived directly from it. This
proposition is [all the more] insignificant when used
against Ricardo, since its author does not attack Ricardo’s
theory of rent in which precisely Ricardo sets forth how the
nominal value of land is evolved on the basis of capitalist
production and does not contradict the definition of
value. The value of land is nothing but the price
which is paid for capitalised ground-rent. Much more
far-reaching developments have therefore to be presumed here
than can be deduced prima facie from the simple
consideration
of the commodity and its value, just as from the
simple concept of productive capital one cannot evolve
fictitious capital, the object of gambling on the stock
exchange, which is actually nothing but the selling and
buying of entitlement to a certain part of the annual tax
revenue.

The second objection—that Ricardo transforms value,
which is a relative concept, into an absolute
concept—is made the chief point of the attack on the
whole Ricardian system in another polemical work (written by
Bailey), which appeared later. In considering this
latter work, we will also cite relevant passages from the
Observations.

A very pertinent observation about the source from which
capital, which pays labour, arises, is contained in an
incidental remark unconsciously made by the author, who on
the contrary wants to use it to prove what is said in the
following sentence not underlined [by me], namely, that the
supply of labour itself constitutes a check on the tendency
of labour to sink to its natural price.

“<An increased supply of labour
is an increased supply of that which is to purchase
labour.> If we say, then, with Mr. Ricardo, that
labour is at every moment tending to what he calls
its natural price, we must only recollect, that the increase
made in its supply, in order to tend to that, is
itself one cause of the counteracting power, which prevents
the tendency from being effectual” (op. cit.,
pp. 72-73).

No analysis is possible unless the average price of
labour, i.e., the value of labour, is made the point of
departure; just as little would it be possible if one failed
to take the value of commodities in general as the
point of departure. Only on this basis is it possible
to understand the real phenomena of price fluctuations.

||807|
“… it is not meant to be asserted by him”
(Ricardo), “that two particular lots of two different
articles, as a hat and a pair of shoes, exchange with one
another when those two particular lots were produced
by equal quantities of labour. By
‘commodity’, we must here understand
‘description of commodity’, not a
particular individual hat, pair of shoes, etc. The
whole labour which produces all the hats in England is to be
considered, to this purpose, as divided among all the
hats. This seems to me not to have been expressed at
first, and in the general statements of his doctrine”
(op. cit., pp. 53-54).

… for example, Ricardo says that
“a portion of the labour of the engineer” who
makes the machines (Ricardo, On the Principles of
Political Economy, and Taxation, third ed., London,
1821, quoted from the Observations) is contained, for
instance, in a pair of stockings. “Yet the
‘total labour’ that produced each single pair of
stockings, if it is of a single pair we are speaking, includes the whole labour of the
engineer; not a ‘portion’; for one machine makes
many pairs, and none of those pairs could have been done
without any part of the machine…”
(Observations etc., London, 1821, p. 54).

The last passage is based on a misunderstanding.
The whole machine enters into the labour process, but only a
part of it enters the formation of value.

Apart from this, some things in the remark are
correct.

We start with the commodity, this specific social
form of the product, as the foundation and prerequisite of
capitalist production. We take individual products and
analyse those distinctions of form which they have as
commodities, which stamp them as commodities. In
earlier modes of production—preceding the capitalist
mode of production—a large part of the output never
enters into circulation, is never placed on the market, is
not produced as commodities, and does not become
commodities. On the other hand, at that time a large
part of the products which enter into production are not
commodities and do not enter into the process as
commodities. The transformation of products into
commodities only occurs in individual cases, is limited only
to the surplus of products, etc., or only to individual
spheres of production (manufactured products), etc. A
whole range of products neither enter into the process as
articles to be sold, nor arise from it as such.
Nevertheless, the prerequisite, the
starting-point, of the formation of capital and of
capitalist production is the development of the product into
a commodity, commodity circulation and consequently money
circulation within certain limits, and consequently trade
developed to a certain degree. It is as such a
prerequisite that we treat the commodity, since we proceed
from it as the simplest element in capitalist
production. On the other hand, the product, the result
of capitalist production, is the commodity. What
appears as its element is later revealed to be its own
product. Only on the basis of capitalist production
does the commodity become the general form of the product
and the more this production develops, the more do the
products in the form of commodities enter into the process
as ingredients. The commodity, as it emerges in
capitalist production, is different from the commodity taken
as the element, the starting-point of capitalist
production. We are no longer faced with the individual
commodity, the individual product. The individual
commodity, the individual product, manifests itself not only
as a real product but also as a commodity, as a part
both really and
conceptually of production as a whole. Each
individual commodity represents a definite portion of
capital and of the surplus-value created by it.

The value of the capital advanced plus the surplus labour
appropriated, for example, a value of £120 (if it is
assumed that £100 is the value of the capital and
£20 that of surplus labour), is, as far as its value
is concerned, contained in the total product let us say, in
1,200 yards of cotton. Each yard, therefore, equals
£120/1200 or
1/10 of £1 or 2s. It is
not the individual commodity which appears as the result of
the process, but the mass of the commodities in which the
value of the total capital has been reproduced plus a
surplus-value. The total value produced divided by the
number of products determines the value of the individual
product and it becomes a commodity only as such an aliquot
part. It is no longer the labour expended on the
individual particular commodity (in most cases, it can no
longer be calculated, and may be greater in the case of one
commodity than in that of another) but a proportional part
of the total labour—i.e., the average of the total
value [divided] by the number of products—which
determines the value of the individual product and
establishes it as a commodity. Consequently, the total
mass of commodities must also be sold, each commodity at its
value, determined in this way, in order to replace the total
capital together with a surplus-value. If only 800 out
of the 1,200 yards were sold, then the capital would not be
replaced, still less would there be a profit. But each
yard would also have been sold below its value, for
its value is determined not in isolation but as an aliquot
part of the total product.

|808| “If you call labour a commodity, it is not
like a commodity which is first produced in order to
exchange, and then brought to market where it must exchange
with other commodities according to the respective
quantities of each which there may be in the market at the
time; labour is created at the moment it is brought
to market; nay, it is brought to market, before it is
created” (op. cit., pp. 75-76).

What is in fact brought to market is not labour, but the
labourer. What he sells to the capitalist is not his
labour but the temporary use of himself as a working
power. This is the immediate object of the contract
which the capitalist and the worker conclude, the purchase
and sale which they transact.

Where payment is for piece-work, task-work, instead of
according to the, time for which the labour-power is placed
at the disposal of the employer, this is only another method
of determining
the time. It is measured by the product, a
definite quantity of products being considered as a standard
representing the socially necessary labour-time. In
many branches of industry in London where piece-work is the
rule, payment is thus made by the hour, but disputes often
arise as to whether this or that piece of work constitutes
“an hour” or not.

Irrespective of the individual form, it is the case not
only with regard to piece-work, but in general, that,
although labour-power is sold on definite terms before its
use, it is only paid for after the work is completed,
whether it is paid daily, weekly, and so on. Here
money becomes the means of payment after it has
served previously as an abstract means of purchase, because
the nominal transfer of the commodity to the buyer is
distinct from the actual transfer. The sale of the
commodity—labour-power—the legal transfer of the
use-value and its actual alienation, do not occur at the
same time. The realisation of the price therefore
takes place later than the sale of the commodity (see the
first part of my book, p. 122). It can also be
seen that here it is the worker, not the capitalist, who
does the advancing, just as in the case of the renting of a
house, it is not the tenant but the landlord who advances
use-value. The worker will indeed be paid (or at least
he may be, if the goods have not been ordered beforehand and
so on) before the commodities produced by him have been
sold. But his commodity, his labour-power, has
been consumed industrially, i.e., has been transferred into
the hands of the buyer, the capitalist, before he, the
worker, has been paid. And it is not a question of
what the buyer of a commodity wants to do with it, whether
he buys it in order to retain it as a use-value or in order
to sell it again. It is a question of the
direct transaction between the first buyer and
seller.

[Ricardo says in the Principles:]

“In different stages of society, the
accumulation of capital, or of the
means of employing labour, is more or less rapid, and
must in all cases depend on the productive powers of
labour. The productive powers of labour are generally
greatest where there is an abundance of fertile land”
(David Ricardo, Principles of Political Economy,
third ed., London, 1821, p. 92). [Quoted from
Observations on certain Verbal Disputes in Political
Economy etc., London, 1821, p. 74.]

[The author of the Observations makes] the
following remark on this passage of Ricardo’s:

“If, in the first sentence, the
productive powers of labour mean the smallness of that
aliquot part of any produce that goes to those whose manual
labour
produced it, the sentence is nearly
identical, because the remaining aliquot part is the fund
whence capital can, if the owner pleases, be
accumulated” [Observations, London, 1821,
p. 74].

(This is a tacit admission that from the standpoint of
the capitalist “productive powers of labour
mean the smallness of that aliquot part of any produce that
goes to those whose manual labour produced it”.
This sentence is very nice.)

“But then this does not generally
happen where there is most fertile land” [loc. cit.,
p. 74].

(This is silly. Ricardo presupposes capitalist
production. He does not investigate whether it
develops more freely with fertile or relatively unfertile
land. Where it exists, it is most productive where
land is most fertile.) Just as the social productive
forces, the natural productive forces of labour, that is,
those labour finds in inorganic nature, appear as the
productive power of capital. (Ricardo himself, in the
passage cited above, rightly identifies productive power of
labour with labour productive of capital, productive of the
wealth that commands labour, not of the wealth that belongs
to labour. His expression “capital, or the
means of employing labour” is, in fact, the only
one in which he grasps the real nature of capital. He
himself is so much the prisoner of a ||809| capitalist standpoint that
this conversion, this quid pro quo, is for him a
matter of course. The objective conditions of
labour—created, moreover, by labour itself—raw
materials and working instruments, are not means employed
by labour as its means, but, on the contrary, they are
the means of employing labour. They are not
employed by labour; they employ labour. For them
labour is a means by which they are accumulated as capital,
not a means to provide products, wealth for the worker.)

“It does in North America, but that
is an artificial state of things”(that is, a
capitalistic state of things).

“It does not in Mexico. It does
not in New Holland. The productive powers of labour
are, indeed, in another sense, greatest where there
is much fertile land, viz. the power of man, if he chooses
it, to raise much raw produce in proportion to the
whole labour he performs. It is, indeed, a gift of
nature, that men can raise more food than the lowest
quantity that they could maintain and keep up the existing
population on…” [loc. cit., pp. 74-75].

(This is the basis of the doctrine of the
Physiocrats. The physical basis of
surplus-value is this “gift of nature”, most
obvious in agricultural labour, which originally satisfied
nearly all human
needs. It is not so in manufacturing labour,
because the product must first be sold as a commodity.
The Physiocrats, the first to analyse surplus-value,
understand it in its natural form.)

“… but ‘surplus
produce’ (the term used by Mr. Ricardo, page 93),
generally means the excess of the whole price of a thing
above that part of it which goes to the labourers who made
it… ”

(the fool does not see that where the land is fertile,
the part of the price of the produce that goes to the
labourer, although it may be small, buys a sufficient
quantity of necessaries; the part that goes to the
capitalist is great)

“a point, which is settled by
human arrangement, and not fixed by nature”
(loc. cit., pp. 74-75).

If the last, concluding passage has any meaning at all,
it is that “surplus produce” in the capitalist
sense must be strictly distinguished from the productivity
of industry as such. The latter is of interest to the
capitalist only insofar as it realises profit for him.
Therein lies the narrowness and limitation of capitalist
production.

“When the demand for an article
exceeds […] that which is, with reference to the
present rate[k] of
supply, the effectual demand; and when, consequently, the
price has risen, either additions can be made to the rate of
supply at the same rate of cost of production as before; in
which case they will be made till the article is brought to
exchange at the same rate as before with other articles
[…]: or, 2ndly, no possible additions can be
made to the former rate of supply: and then the price, which
has risen, will not be brought down […], but continue
to afford, as Smith says, a greater rent, or profits, or
wages (or all three), to the particular land, capital, or
labour, employed in producing the article, […] or,
3rdly, the additions which can be made will require
proportionally more land, or capital, or labour, or
all three, than were required for the periodical
production” (note these words) “of the
amount previously supplied. Then the addition will not
be made till the demand is strong enough, 1st, to pay this
increased price for the addition; 2ndly, to pay the same
increased price upon the old amount of supply. For the
person who has produced the additional quantity will be no
more able to get a high price for it, than those who
produced the former quantity… There will then
be surplus profits in this trade… The
surplus profits will be either in the hands of some
particular producers only … or, if the
additional produce cannot be distinguished
from the rest, will be a surplus shared by all…
People will give something to belong to a trade in which
surplus profit can be made… What they so
give, is rent” (op. cit., pp. 79-81).

Here, one need only say that in this book rent is for the
first time regarded as the general form of consolidated
surplus profit.

||810|
“‘Conversion of revenue into capital’ is
another of these verbal sources of controversy.
One man means by it, that the capitalist lays out part of
the profits he bas made by his capital, in making additions
to his capital, instead of spending it for his private use,
as he might else have done: another man means by it, that a
person lays out as capital something which he never got as
profits, or any capital of his own, but received as rent,
wages, salary” (op. cit., pp. 83-84).

This last passage—“another of these
verbal sources of controversy. One man means by
it … another man means by it…
”—testifies to the method used by this smart
alec.

b) “An Inquiry into those
Principles…” [The Lack of Understanding of the
Contradictions of the capitalist Mode of production Which
Cause Crises]

An Inquiry into those Principles, respecting the
Nature of Demand and the Necessity of Consumption, lately
advocated by Mr. Malthus etc., London, 1821.

A Ricardian work. Good against Malthus.
Demonstrates the infinite narrow-mindedness to which the
perspicacity of these fellows is reduced as soon as they
examine not landed property, but capital.
Nevertheless, it is one of the best of the polemical works
of the decade mentioned.

“If the capital employed in cutlery
is increased as 100:101, and can only produce an increase of
cutlery in the same proportion, the degree in which it will
increase the command which its producers have over things in
general, no increased production of them having by
the supposition taken place, will be in a less
proportion; and this, and not the increase of the
quantity of cutlery, constitutes the employers’ profits, or
the increase of their wealth. But if the like addition
of one per cent had been making at the same time to the
capitals of all other trades […] and with the
like result as to produce, this […] would not
follow: for the rate at which each article would exchange
with the rest would remain unaltered, and therefore a given
portion of each would give the same command as before over
the rest” ([An Inquiry into those Principles,
London, 1821,] p. 9).

First of all, if there has been no increase of production
(and of the capital devoted to production) except in the
cutlery trade, as is assumed, then the return will not be
“in a less proportion”, but an absolute
loss. There are then only three courses open to the
cutlery producer. Either he must exchange his
increased product as he would have done his smaller product,
and his increased production would thus result in a positive
loss. Or he must try to get new consumers; if amongst
the old circle, this could only be done by withdrawing
customers from another trade and shifting his loss upon
other shoulders; or he must enlarge his market
beyond his former limits; but neither the one nor the
other operation depends on his good will; nor on the mere
existence of an increased quantity of knives. Or, in
the last instance, he must carry over his production to
another year and diminish his new supply for that year,
which, if his addition of capital did exist not only in
additional wages, but in additional fixed capital, will
equally result in a loss.[l]

Furthermore: If all other capitals have accumulated at
the same rate, it does not follow at all that their
production has increased at the same rate. But if it
has, it does not follow that they want one per cent more of
cutlery, as their demand for cutlery is not at all
connected, either with the increase of their own produce, or
with their increased power of buying cutlery. What
follows is merely the tautology: If the increased capital
used in each particular branch of production is
proportionate to the rate in which the wants of society
increase the demand for each particular commodity, then the
increase of one commodity se-cures a market for the
increased supply of other commodities.

Here, therefore, is presupposed 1. capitalist
production, in which the production of each particular
industry and its increase are not directly regulated
and ||811|controlled by
the wants of society, but by the productive forces at the
disposal of each individual capitalist, independent of the
wants of society. 2. It is assumed that nevertheless
production is proportional [to the requirements] as
though capital were employed in the different spheres of
production directly by society in accordance with its
needs.

On this assumption—if capitalist production were
entirely socialist production—a contradiction in
terms—no over-production could, in fact, occur.

By the way, in the various branches of industry in which
the same accumulation of capital takes place (and
this too is an unfortunate assumption that capital is
accumulated at an equal rate in different spheres),
the amount of products corresponding to the increased
capital employed may vary greatly, since the productive
forces in the different industries or the total use-values
produced in relation to the labour employed differ
considerably. The same value is produced in both
cases, but the quantity of commodities in which it is
represented is very different. It is
quite incomprehensible, therefore, why industry A,
because the value of its output has increased by 1 per cent
while the mass of its products has grown by 20 per cent,
must find a market in B where the value has likewise
increased by 1 per cent, but the quantity of its output only
by 5 per cent. Here, the author has failed to take
into consideration the difference between use-value and
exchange-value.

Say’s earth-shaking discovery that “commodities can
only be bought with commodities” simply means that
money is itself the converted form of the commodity.
It does not prove by any means that because I can buy only
with commodities, I can buy with my commodity, or
that my purchasing power is related to the quantity
of commodities I produce. The same value can be
embodied in very different quantities [of
commodities]. But the
use-value—consumption—depends not on value, but
on the quantity. It is quite unintelligible why I
should buy six knives because I can get them for the same
price that I previously paid for one. Apart from the
fact that the workers do not sell commodities, but labour, a
great number of people who do not produce commodities at all
buy things with money. Buyers and sellers of
commodities are not identical. The landlord, the
moneyed capitalist and others obtain in the form of
money commodities produced by other people.
They are buyers without being sellers of
“commodities”. Buying and selling occurs
not only between industrial capitalists, but they also sell
to workers; and likewise to owners of revenue who are not
commodity producers. Finally, the purchases and sales
transacted by them as capitalists are very different from
the purchases they make as revenue-spenders.

“Mr. Ricardo (p. 359, second ed.),
after quoting the doctrine of Smith about the cause of the
fall of profits, adds, ‘M. Say has, however, most
satisfactorily shown, that there is no amount of capital
which may not be employed in a country, because demand is
only limited by production’” [An
Inquiry into those Principles, London, 1821, p. 18].

(This is very wise. Limited, indeed.
Nothing can be demanded which cannot be produced upon
demand, or which the demand does not find ready made in the
market. Hence, because demand is limited by
production, it by no means follows that production is, or
was, limited by demand, and can never exceed the demand,
particularly the demand at the market price. This is
Say-like acumen.)

“‘There
cannot be accumulated (p. 360) in a country any amount of
capital which cannot be employed productively’
(meaning, I presume,”—says the author in
brackets—“‘with profit to the
owner’) ‘until wages rise so high in
consequence of the rise of necessaries, and so little
consequently remains for the profits of stock, that the
motive for accumulation ceases’” [loc. cit.,
pp. 18-19].

(Ricardo here equates “productively” and
“profitably”, whereas it is precisely the fact
that in capitalist production “profitably” alone
is “productively”, that constitutes the
difference between it and absolute production, as well as
its limitations. In order to produce
“productively”, production must be carried on in
such a way that the mass of producers are excluded from the
demand for a part of the product. Production has to be
carried on in opposition to a class ||812| whose consumption stands in no
relation to its production—since it is precisely in
the excess of its production over its consumption that the
profit of capital consists. On the other hand,
production must be carried on for classes who consume
without producing. It is not enough merely to give the
surplus product a form in which it becomes an object of
demand for these classes. On the other hand, the
capitalist himself, if he wishes to accumulate, must not
himself consume as much of his own products, insofar as they
are consumer goods, as he produces. Otherwise he
cannot accumulate. That is why Malthus opposes to the
capitalist classes whose task is not accumulation but
expenditure. And while on the one hand all these
contradictions are assumed, it is assumed on the other that
production proceeds without any friction just as if these
contradictions did not exist at all. Purchase is
divorced from sale, commodity from money, use-value from
exchange-value. It is assumed however that this
separation does not exist, but that there is barter.
Consumption and production are separated; [there are]
producers who do not consume and consumers who do not
produce. It is assumed that consumption and production
are identical. The capitalist directly produces
exchange-value in order to increase his profit, and not for
the sake of consumption. It is assumed that he
produces directly for the sake of consumption and only for
it. [If it is] assumed that the contradictions
existing in bourgeois production—which, in fact, are
reconciled by a process of adjustment which, at the same
time, however, manifests itself as crises, violent fusion of
disconnected factors operating independently of one another
and yet correlated—if it is assumed that the
contradictions existing in bourgeois production
do not exist, then these contradictions obviously
cannot come into play. In every industry each
individual capitalist produces in proportion to his
capital irrespective of the needs of society and especially
irrespective of the supply of competing capitalists in the
same industry. It is assumed that he produces as if he
were fulfilling orders placed by society. If there
were no foreign trade, then luxuries could be produced at
home, whatever their cost. In that case, labour, with
the exception of [the branches producing] necessaries,
would, in actual fact, be very unproductive. Hence
accumulation of capital [would proceed at a low rate].
Thus every country would be able to employ all the capital
accumulated there, since according to the assumption very
little capital would have been accumulated.)

“The latter sentence limits (not to
say contradicts) the former, if ‘which may not be
employed’, in the former, means ‘employed
productively’, or rather,
‘profitably’. And if it means simply
‘employed’, the proposition is useless; because
neither Adam Smith nor any body else, I presume, denied that
it might ‘be employed’ if you did not care what
profit is brought” (loc. cit., p. 19).

Ricardo says indeed that all capital in a given country,
at whatever rate accumulated, may be employed profitably; on
the other hand he says that the very fact of the
accumulation of capital checks its “profitable”
employment, because it must result in lessening profits,
that is, the rate of accumulation.

“… the very meaning of an
increased demand by them” (the labourers) “is a
disposition to take less themselves, and leave a larger
share for their employers; and if it be said that this, by
diminishing consumption, increases glut, I can only answer,
that glut […] is synonymous with high
profits…” (op. cit., p. 59).

This is indeed the secret basis of glut.

“… the labourers do not,
considered as consumers, derive any benefit from machines,
while flourishing” (as Mr. Say says in his
Traité d’économie politique, fourth
ed., Vol. I, p. 60) “unless the article, which the
machines cheapen, is one that can be brought, by cheapening,
within their use. Threshing-machines, windmills, may
be a great thing for them in this view; but the invention of
a veneering machine, or a block machine, or a lace frame,
does not mend their condition much” (op. cit.,
pp. 74-75).

“The habits of the labourers, where
division of labour has been carried very far, are applicable
only to the particular line they have been used to; they
are a sort of machines. Then, there is a long
period of idleness, that is, of labour lost; of wealth cut
off at its root. It is quite useless to repeat, like a
parrot, that things have a tendency to find their
level. We must look about us, and see they ||813|cannot for a long time
find a level; that when they do, it will be a far lower
level than they set out from” (op. cit.; p.72).

This Ricardian, following Ricardo’s example, recognises
correctly crises resulting from sudden changes in the
channels of trade. This was the case in England after
the war of 1815. And consequently, whenever a crisis
occurred, all later economists declared that the most
obvious cause of the particular crisis was the only
possible cause of all crises.

The author also admits that the credit system may be a
cause of crises (p. 81 et seq.) (as if the credit
system itself did not arise out of the difficulty of
employing capital “productively”, i.e.,
“profitably”). The English, for example,
are forced to lend their capital to other countries in order
to create a market for their commodities.
Over-production, the credit system, etc., are means by which
capitalist production seeks to break through its own
barriers and to produce over and above its own
limits. Capitalist production, on the one hand,
has this driving force; on the other hand, it only tolerates
production commensurate with the profitable employment of
existing capital. Hence crises arise, which
simultaneously drive it onward and beyond [its own limits]
and force it to put on seven-league boots, in order to reach
a development of the productive forces which could only be
achieved very slowly within its own limits.

What the author writes about Say is very true. This
should be dealt with in connection with Say (see p. 134,
notebook VII).

“He” (the worker) “will
agree to work part of his time for the capitalist,
or, what comes to the same thing, to consider part of the
whole produce, when raised and exchanged, as belonging to
the capitalist, He must do so, or the capitalist would not
have afforded him this[m] assistance” [op. cit.,
p. 102].

(Namely capital. Very fine that it comes to the
same thing whether the capitalist owns the whole produce and
pays part of it as wages to the labourer, or whether the
labourer leaves, makes over to the capitalist part of his
(the labourer’s) produce.)

“But as the capitalist’s motive
was gain, and as these advantages always depend, in a
certain degree, on the will to save, as well as on
the power, the capitalist will be disposed to afford
an additional portion of these assistances; and as he will
find fewer people in want of this additional portion, than
were in want of the original portion, he must expect to have
a less share of the benefit to himself; he must be content
to make a present” (!!!) “(as it were) to
the labourer, of part of the benefit his assistance
occasions, or else he would not get the other part: the
profit is reduced, then, by competition” (loc. cit.,
pp. 102-03).

This is very fine. If, as a consequence of the
development of labour productivity, capital accumulates so
quickly that the demand for labour increases wages and the
worker works for a shorter time gratis for the capitalist
and shares to some degree in the benefits of his more
productive labour—the capitalist makes him a
“present”.

The same author demonstrates in great detail that high
wages are bad, a discouragement for workers, although,
speaking of the landlords, he considers that low profit is a
discouragement for the capitalists (see p. 13, notebook
XII).

“Adam Smith thought […] that
accumulation or increase of stock in general lowered the
rate of profit in general, on the same principle which makes
the increase of stock in any particular trade lower the
profits of that trade. But such increase of stock in a
particular trade means an increase more in proportion
than stock is at the same time increased in other
trades” (op. cit., p. 9).

Against Say. (Notebook XII, p. 12.)

“The immediate market for capital, or
field for capital may be said to be labour. The
amount of capital which can be invested at a given moment,
in a given country, or the world, so as to return not less
than a given rate of profits, seems principally to depend on
the quantity of labour, which it is possible, by
laying out that capital, to induce the then existing number
of human beings to perform” (op. cit., p. 20).

||814| “Profits
do not depend on price, they depend on price compared
with outgoings” (op. cit., p. 28).

“The proposition of M. Say does not
at all prove that capital opens a market for itself,
but only that capital and labour open a market for one
another” (op. cit., p. 111).

c) Thomas De Quincey [Failure to Overcome the Real Flaws
in the Ricardian Standpoint]

Dialogues of Three Templars on Political Economy,
chiefly in relation to the Principles of Mr. Ricardo (London
Magazine, Vol. IX, 1824) (author: Thomas De
Quincey).

Attempt at a refutation of all the attacks made on
Ricardo. That he is aware of what is at issue is to be
seen from this sentence:

“… all […]
difficulties” of political economy “will be
found reducible” [to] “this: What is the ground
of exchangeable value?”([De Quincey, Dialogues of
Three Templars, 1824,] p. 347.)

In this work, the inadequacies of the Ricardian view are
often pointedly set forth, although the dialectical depth is
more affected than real. The real difficulties, which
arise not out of the determination
of value, but from Ricardo’s inadequate
elaboration of his ideas on this basis, and from his
arbitrary attempt to make concrete relations directly fit
the simple relation of value, are in no way resolved or even
grasped. But the work is characteristic of the period
in which it appeared. It shows that in political
economy consistency and thinking were still taken seriously
at that time.

(A later work by the same author: The Logic of
Political Economy, Edinburgh, 1844, is weaker.)

De Quincey very clearly outlines the differences between
the Ricardian view and those which preceded it, and does not
seek to mitigate them by re-interpretation or to abandon the
essential features of the problems in actual fact while
retaining them in a purely formal, verbal way as happened
later on, thus opening the door wide to easy-going,
unprincipled eclecticism.

One point in the Ricardian doctrine which is especially
emphasised by De Quincey and which should be mentioned here
because it plays a role in the polemic against Ricardo to
which we shall refer below, is that the command which one
commodity has over other commodities (its purchasing power;
in fact, its value expressed in terms of another commodity)
is altogether different from its real value.

It is quite wrong to conclude “that
the real value is great because the quantity it buys is
great, or small because the quantity it buys is
small… If A double its value, it will not
therefore command double the former quantity of B. It
may do so: and it may also command five hundred times more,
or five hundred times less… No man has ever
denied that A by doubling its own value will command a
double quantity of all things which have been stationary in
value. […] But the question is whether
universally, from doubling its value, A will command a
double quantity…” ([Dialogues of Three
Templars,] pp. 552-54 passim).

d) Samuel Bailey

[α) Superficial Relativism on the Part of the Author of
“Observations on certain Verbal Disputes” and on
the Part of Bailey in Treating the Category of Value.
The Problem of the Equivalent. Rejection of the Labour
Theory of Value as the Foundation of Political Economy]

A Critical Dissertation on the Nature, Measures, and
Causes of Value; chiefly in Reference to the Writings of
Mr. Ricardo and his Followers. By the Author of
Essays on the Formation and Publication of Opinions (Samuel
Bailey), London, 1825.

This is the main work directed against Ricardo.
(Also aimed against Malthus.) It seeks to overturn the
foundation of the doctrine—value. It is
definitely worthless except for the definition of the
“measure of value”, or rather, of money
in this function. Compare also the same author’s: A
Letter to a Political Economist; occasioned by an Article in
the Westminster Review on the Subject of Value etc.,
London, 1826.

Since, as has been mentioned,[n] this work basically agrees with
Observations on certain Verbal Disputes in Political
Economy, it is here necessary to add the relevant
passages from these Observations.

The author of the Observations accuses Ricardo of
having transformed value from a relative attribute of
commodities in their relationship to one another, into
something absolute.

The only thing that Ricardo can be accused of in this
context is that, in elaborating the concept of value, he
does not clearly distinguish between the various aspects,
between the exchange-value of the commodity, as it
manifests itself, appears in the process of commodity
exchange, and the existence of the commodity as value
as distinct from its existence as an object, product,
use-value.

||815| It is said in the
Observations:

“If the absolute quantity of labour,
which produces the greater part of commodities, or all
except one, is increased, would you say that the value of
that one is unaltered? In what sense? since it
will exchange for less of every commodity besides. If,
indeed, it is meant to be asserted that the meaning
of increase or diminution of value is increase or diminution
in the quantity of labour that produced the commodity spoken
of, the conclusions I have just been objecting to might be
true enough. But to say, as Mr. Ricardo does, that the
comparative quantities of labour that produce two
commodities are the cause of the rate at which these two
commodities will exchange with each other, i.e., of the
exchangeable value of each, understood in relation to the
other, is very different from saying that the
exchangeable value of either means the quantity of
labour which produced it, understood without any reference
to the other, or to the existence of any other”
(Observations etc., p. 13).

“Mr. Ricardo tells us indeed
[…] that ‘the inquiry to which he wishes to
draw the reader’s attention relates to the effect of the
variations in the relative value of commodities, and
not in their absolute value’; as if be there
considered that there is such a thing as exchangeable
value which is not relative” (op. cit., pp. 9-10).

“That Mr. Ricardo has departed from
his original use of the term value, and has made of it
something absolute, instead of relative, is still more
evident
in his chapter entitled ‘Value and Riches,
their distinctive Properties’. The question
there discussed, has been discussed also by others, and is
purely verbal and useless…” (op. cit.,
pp. 15-16).

Before dealing with this author, we shall add the
following about Ricardo. In his chapter on
“Value and Riches”, he argues that social wealth
does not depend on the value of the commodities produced,
although this latter point is decisive for every individual
producer. It should have been all the more clear to
him that a mode of production whose exclusive aim is
surplus-value, in other words, which is based on the
relative poverty of the mass of the producers, cannot
possibly be the absolute form of the production of wealth,
as he constantly asserts.

Now to the Observations of the
“verbal” wiseacre.

If all commodities except one increase in value because
they cost more labour-time than they did before, smaller
amounts of these commodities will be exchanged for the
single commodity whose labour-time remains unchanged.
Its exchange-value, insofar as it is realised in
other commodities—that is, its exchange-value
expressed in the use-values of all other
commodities—has been reduced. “Would you
then say that the value of that one is
unaltered?” This is merely a formulation of the
point at issue, and it calls neither for a positive nor for
a negative reply. The same result would occur if the
labour-time required for the production of the one commodity
were reduced and that of all the others remained
unchanged. A given quantity of this particular
commodity would exchange for a reduced quantity of all the
other commodities. The same phenomenon occurs in both
cases although from directly opposite causes.
Conversely, if the labour-time required for the production
of commodity A remained unchanged, while that of all others
were reduced, then it would exchange for larger amounts of
all the other commodities. The same would happen for
the opposite reason, if the labour-time required for the
production of commodity A increased and that required for
all other commodities remained unchanged. Thus,
sometimes commodity A exchanges for smaller quantities of
all the other commodities, and this for either of two
different and opposite reasons. At other times it
exchanges for larger quantities of all the other
commodities, again for two different and opposite
reasons. But it should be noted that it is assumed
that it always exchanges at its value, consequently
for an equivalent. It always realises its value
in the quantity of use-values of the
other commodities for which it exchanges, no matter how
much the quantity of these use-values varies.

From this it obviously follows: that the rate at which
commodities exchange for one another as use-values, although
it is an expression of their value, their
realised value, is not their value itself, since the
same proportion of value can be represented by quite
different quantities of use-values. Value as an aspect
of the commodity is not expressed in its own use-value, or
in its existence as use-value. Value manifests
itself when commodities are expressed in other use-values,
that is, it manifests itself in the rate at which these
other use-values are exchanged for them. If one ounce
of gold equals a ton of iron, that is, if a small quantity
of gold exchanges for a large quantity of iron, is therefore
the value of the gold expressed in iron greater than the
value of the iron expressed in gold? That commodities
exchange for one another in proportion to the labour
embodied in them, means that they are equal, alike, insofar
as they constitute the same quantity of labour.
Consequently it means likewise that every commodity,
considered in itself, is something different from its
own use-value, ||816| from its
own existence as use-value.

The value of the same commodity can, without
changing, be expressed in infinitely different
quantities of use-values, always according to whether I
express it in the use-value of this or of that
commodity. This does not alter the value, although it
does alter the way it is expressed. In the same way,
all the various quantities of different use-values in which
the value of commodity A can be expressed, are equivalents
and are related to one another not only as values, but as
equal values, so that when these very unequal quantities of
use-value replace one another, the value remains completely
unchanged, as if it had not found expression in quite
different use-values.

When commodities are exchanged in the proportion in which
they represent equal amounts of labour-time, then it is
their aspect as materialised labour-time, as embodied
labour-time, which manifests their substance, the
identical element they contain. As such, they
are qualitatively the same, and differ only
quantitatively, according to whether they represent
smaller or larger quantities of the same substance,
i.e., labour-time. They are values as
expressions of the same element; and they are equal values,
equivalents, insofar as they represent an equal
amount of labour-time. They can only be compared as
magnitudes, because
they are already homogeneous magnitudes,
qualitatively identical.

It is as manifestations of this substance that these
different things constitute values and are related to
one another as values; their different magnitudes of
value, their immanent measure of value are thus also
given. And only because of this can the value
of a commodity be represented, expressed, in the use-values
of other commodities as its equivalents. Hence the
individual commodity as value, as the
embodiment of this substance, is different from
itself as use-value, as an object, quite apart from the
expression of its value in other commodities. As the
embodiment of labour-time, it is value in general, as
the embodiment of a definite quantity of labour-time, it is
a definite magnitude of value.

It is therefore typical of our wiseacre when he says: If
we mean that, we do not mean that and vice
versa. Our “meaning” has nothing at all to
do with the essential character of the thing we
consider. If we speak of the value in exchange
of a thing, we mean in the first instance of course
the relative quantities of all other commodities that
can be exchanged for the first commodity. But, on
further consideration, we shall find that for the
proportion, in which one thing exchanges for an infinite
mass of other things which have nothing in common with
it—and even if there are natural or other similarities
between those things, they are not considered in the
exchange—for the proportion to be a fixed
proportion, all those various heterogeneous things must
be considered as proportionate representations, expressions
of the same common unity, [of] an element quite
different from their natural existence or appearance.
We shall furthermore find, that if our views have any sense,
the value of a commodity is something which not only
distinguishes it from or relates it to other commodities,
but is a quality differentiating it from its own existence
as a thing, a value in use.[o]

To estimate the value of A, a book for instance,
in B, coals, and C, wine, A, B and C must be as value
something different from their existence as books, coals or
wine. To estimate the value
of A in B, A must have a value independent of the
estimation of that value in B, and both must be equal to a
third thing expressed in both of them.

It is quite wrong to say that the value of a commodity is
thereby transformed from something relative into
something absolute. On the contrary, as a
use-value, the commodity appears as something
independent. On the other hand, as value it appears as
something merely contingent, something merely
determined by its relation to socially necessary, equal,
simple labour-time. It is to such an extent relative
that when the labour-time required for its reproduction
changes, its value changes, although the labour-time really
contained in the commodity has remained unaltered.

||817| How deeply our
wiseacre has sunk into fetishism and how he
transforms what is relative into something positive, is
demonstrated most strikingly in the following passage:

“Value is a property of
things, riches of men. Value, in this sense,
necessarily implies exchange, riches do not”
(loc. cit., p. 16).

Riches here are use-values. These, as far as men
are concerned, are, of course, riches, but it is through its
own properties, its own qualities, that a thing is a
use-value and therefore an element of wealth for men.
Take away from grapes the qualities that make them grapes,
and their use-value as grapes disappears for men and they
cease to be an element of wealth for men. Riches which
are identical with use-values are properties of
things that are made use of by men and which express a
relation to their wants. But “value” is
supposed to be a “property of
things”.

As values, commodities are social magnitudes, that
is to say, something absolutely different from their
“properties” as “things”. As
values, they constitute only relations of men in their
productive activity. Value indeed “implies
exchanges”, but exchanges are exchanges of things
between men, exchanges which in no way affect the things as
such. A thing retains the same
“properties” whether it be owned by A or by
B. In actual fact, the concept “value”
presupposes “exchanges” of the products.
Where labour is communal, the relations of men in their
social production do not manifest themselves as
“values” of “things”. Exchange
of products as commodities is a method of exchanging labour,
[it demonstrates] the dependence of the labour of each upon
the labour of the others [and corresponds to] a certain mode
of social labour or social production.

In the first part of my book, I mentioned that it is
characteristic of labour based on private exchange that the
social character of labour “manifests” itself in
a perverted form—as the “property” of
things; that a social relation appears as a relation between
things (between products, values in use, commodities).
This appearance is accepted as something real by our
fetish-worshipper, and he actually believes that the
exchange-value of things is determined by their properties
as things, and is altogether a natural property of
things. No scientist to date has yet discovered what
natural qualities make definite proportions of snuff tobacco
and paintings “equivalents” for one another.

Thus he, the wiseacre, transforms value into something
absolute, “a property of things”, instead of
seeing in it only something relative, the relation of things
to social labour, social labour based on private exchange,
in which things are defined not as independent entities, but
as mere expressions of social production.

But to say that “value” is not an absolute,
is not conceived as an entity, is quite different from
saying that commodities must impart to their exchange-value
a separate expression which is different from
and independent of their use-value and of their
existence as real products, in other words, that commodity
circulation is bound to evolve money. Commodities
express their exchange-value in money, first of all in the
price, in which they all present themselves as
materialised forms of the same labour, as only
quantitatively different expressions of the same
substance. The fact that the exchange-value of
the commodity assumes an independent existence in
money is itself the result of the process of exchange, the
development of the contradiction of use-value and
exchange-value embodied in the commodity, and of another no
less important contradiction embodied in it, namely, that
the definite, particular labour of the private individual
must manifest itself as its opposite, as equal, necessary,
general labour and, in this form, social labour. The
representation of the commodity as money implies not only
that the different magnitudes of commodity values are
measured by expressing the va1ues in the use-value of one
exclusive commodity, but at the same time that they are all
expressed in a form in which they exist as the embodiment of
social labour and are therefore exchangeable for
every other commodity, that they are translatable at will
into any use-value desired. Their representation as
money—in the price—therefore appears first only
as something nominal, a representation
which is realised only through actual
sale. Ricardo’s mistake is that he is concerned
only with the magnitude of value. Consequently
his attention is concentrated on ||818| the relative quantities of
labour which the different commodities represent, or
which the commodities as values embody. But the labour
embodied in them must be represented as social
labour, as alienated individual labour. In the price
this representation is nominal; it becomes reality only in
the sale. This transformation of the labour of private
individuals contained in the commodities into uniform
social labour, consequently into labour which can be
expressed in all use-values and can be exchanged for them,
this qualitative aspect of the matter which is
contained in the representation of exchange-value as money,
is not elaborated by Ricardo. This
circumstance—the necessity of presenting the
labour contained in commodities as uniform social
labour, i.e., as money—is overlooked by
Ricardo.

For its part, the development of capital already
presupposes the full development of the
exchange-value of commodities and consequently its
independent existence as money. The point of departure
in the process of the production and circulation of capital,
is the independent form of value which maintains itself,
increases, measures the increase against the original
amount, whatever changes the commodities in which it
manifests itself may undergo, and quite irrespective of
whether it presents itself in the most varied use-values and
moves from commodity to commodity. The relation
between the value antecedent to production and the value
which results from it—capital as antecedent value is
capital in contrast to profit—constitutes the
all-embracing and decisive factor in the whole process of
capitalist production. It is not only an independent
expression of value as in money, but dynamic value, value
which maintains itself in a process in which use-values pass
through the most varied forms. Thus in capital the
independent existence of value is raised to a higher power
than in money.

From this we can judge the wisdom of our
“verbal” wiseacre, who treats the independent
existence of exchange-value as a figure of speech, a manner
of talking, a scholastic invention.

“Value, or valeur in French, is not
only used absolutely instead of relatively as a quality of
things, but is even used by some […] as […] a
measurable commodity, ‘Possessing a value’,
‘transferring a portion of value’” (a very
important factor with regard to fixed capital),
“‘the sum, or totality of values’
(valeurs), etc. I do not know what this means”
(op. cit., p. 57).

The fact that the value which has become independent
acquires only a relative expression in money, because money
itself is a commodity, and hence has a changeable value,
makes no difference but is a shortcoming which arises from
the nature of the commodity and the necessity of expressing
its exchange-value, as distinct from its use-value.
Our author has made it abundantly clear that he does
“not know” this. This is shown by the kind
of criticism which would like to talk out of existence the
difficulties innate in the contradictory functions of things
themselves, by declaring them to be the result of reflexions
or of conflicting definitions.

“‘The relative value of
two things’ […] is open to two meanings: the
rate at which two things exchange or would exchange with
each other, or the comparative portions of a
third for which each exchanges or would exchange”
(op. cit., p. 53).

To begin with, this is a fine definition, If 3 lbs. of
coffee exchange for 1 lb. of tea today or would do so
tomorrow, it does not at all mean that equivalents have been
exchanged for each other. According to this, a
commodity could always be exchanged only at its value, for
its value would constitute any quantity of some other
commodity for which it had been accidentally
exchanged. This, however, is not what people generally
mean, when they say that 3 lbs. of coffee have been
exchanged for their equivalent in tea. They assume
that after, as before, the exchange, a commodity of the
same value is in the hands of either of the
exchangers. The rate at which two commodities exchange
does not determine their value, but their value determines
the rate at which they exchange. If value were nothing
more than the quantity of commodities for which commodity A
is accidentally exchanged, how is it possible to express the
value of A in terms of commodity B, or C, etc.?
Because ||819| then, since
there is no immanent measure common to the two
commodities, the value of A could not be expressed in terms
of B before it had been exchanged against B.

Relative value means first of all magnitude of
value in contradistinction to the quality of having
value at all. For this reason, the latter is
not something absolute. It means, secondly, the value
of one commodity expressed in the use-value of another
commodity. This is only a relative
expression of its value, namely, in relation to the
commodity in which it is expressed. The value of a
pound of coffee is only relatively expressed in
tea; to express it absolutely—even in a relative
way, that is to say, not in regard to labour-time, but to
other commodities—it ought to be expressed in an
infinite series of equations with all other
commodities. This would be an absolute
expression of its relative value; its absolute
expression would be its expression in terms of
labour-time and this absolute expression would express
it as something relative, but in the absolute relation, by
which it is value.

***

Let us now turn to Bailey.

His book has only one positive merit—that he was
the first to give a more accurate definition of the
measure of value, that is, in fact, of one of the
functions of money, or money in a particular, determinate
form. In order to measure the value of
commodities—to establish an external measure of
value—it is not necessary that the value of the
commodity in terms of which the other commodities are
measured, should be invariable. (It must on the
contrary be variable, as I have shown in the first part,
because the measure of value is, and must be, a commodity
since otherwise it would have no immanent measure in
common with other commodities.) If, for example, the
value of money changes, it changes to an equal degree in
relation to all other commodities. Their relative
values are therefore expressed in it just as correctly as if
the value of money had remained unchanged.

The problem of finding an “invariable measure of
value” is thereby eliminated. But this problem
itself (the interest in comparing the value of commodities
in different historical periods, is, indeed, not an
economic interest as such, [but] an academic
interest) arose out of a misunderstanding and conceals a
much more profound and important question.
“Invariable measure of value” signifies
primarily a measure of value which is itself of invariable
value, and consequently, since value itself is a predicate
of the commodity, a commodity of invariable value. For
example, if gold and silver or corn, or labour, were such
commodities, then it would be possible to establish, by
comparison with them, the rate at which other commodities
are exchanged for them, that is, to measure exactly the
variations in the values of these other commodities by their
prices in gold, silver, or corn, or their relation to
wages. Stated in this way, the problem therefore
presupposes from the outset that in the “measure
of
value” we are dealing simply with the commodity in
which the values of all other commodities are expressed,
whether it be the commodity by which they are really
represented—i.e., money, the commodity which functions
as money—or a commodity which, because its value
remains invariable, would function as the money in terms of
which the theoretician makes his calculations. It thus
becomes evident that in this context it is in any case a
question only of a kind of money which as the measure of
value—either theoretically or practically—would
itself not be subject to changes in value.

But for commodities to express their exchange-value
independently in money, in a third commodity, the exclusive
commodity, the values of commodities must already be
presupposed. Now the point is merely to compare them
quantitatively. A homogeneity which makes them
the same—makes them values—which as values
makes them qualitatively equal, is already presupposed in
order that their value and their differences in value can be
represented in this way. For example, if all
commodities express their value in gold, then this
expression in gold, their gold price, their equation with
gold, is an equation on the basis of which it is possible to
elucidate and compute their value relation to one another,
for they are now expressed as different quantities of
gold and in this way the commodities are represented in
their prices, ||820| as
comparable magnitudes of the same common denominator.

But in order to be represented in this way, the
commodities must already be identical as
values. Otherwise it would be impossible to
solve the problem of expressing the value of each commodity
in gold, if commodity and gold or any two commodities as
values were not representations of the same substance,
capable of being expressed in one another. In other
words, this presupposition is already implicit in the
problem itself. Commodities are already presumed as
values, as values distinct from their use-values,
before the question of representing this value in a special
commodity can arise. In order that two quantities of
different use-values can be equated as equivalents, it is
already presumed that they are equal to a third, that
they are qualitatively equal and only constitute
different quantitative expressions of this qualitative
equality.

The problem of an “invariable measure of
value” was simply a spurious name for the quest for
the concept, the nature, of value itself, the
definition of which could not be another value,
and consequently could not be subject to variations as
value. This was labour-time, social labour, as
it presents itself specifically in commodity
production. A quantity of labour has no value, is not
a commodity, but is that which transforms commodities into
values, it is their common substance; as
manifestations of it commodities are qualitatively
equal and only quantitatively different.
They [appear] as expressions of definite quantities of
social labour-time.

Let us assume that gold has an invariable value. If
the value of all commodities were then expressed in gold one
could measure variations in the values of commodities by
their gold prices. But in order to express the value
of commodities in gold, commodities and gold must be
identical as values. Gold and commodities can
only be considered to be identical as definite quantitative
expressions of this value, as definite magnitudes of
value. The invariable value of gold and the variable
value of the other commodities would not prevent them, as
value, from being the same, [Consisting of] the same
substance. Before the invariable value of gold can
help us to make a step forward, the value of commodities
must first be expressed, assessed, in gold—that is,
gold and commodities must be represented as equivalents, as
expressions of the same substance.

{In order that the commodities may be measured according
to the quantity of labour embodied in them—and the
measure of the quantity of labour is time—the
different kinds of labour contained in the different
commodities must be reduced to uniform, simple labour,
average labour, ordinary, unskilled labour. Only then
can the amount of labour embodied in them be measured
according to a common measure, according to time. The
labour must be qualitatively equal so that its differences
become merely quantitative, merely differences of
magnitude. This reduction to simple, average labour is
not, however, the only determinant of the quality of
this labour to which as a unity the values of the
commodities are reduced. That the quantity of labour
embodied in a commodity is the quantity socially
necessary for its production—the labour-time being
thus necessary labour-time—is a definition
which concerns only the magnitude of value. But
the labour which constitutes the substance of value is not
only uniform, simple, average labour; it is the labour of a
private individual represented in a definite product.
However, the product as value must be the embodiment of
social labour and, as such, be directly convertible
from one use-value into all others.
(The particular use-value in which labour is directly
represented is irrelevant so that it can be converted from
one form into another.) Thus the labour of
individuals has to be directly represented as its
opposite, social labour; this transformed labour is,
as its immediate opposite, abstract, general labour,
which is therefore represented in a general equivalent, only
by its alienation does individual labour manifest itself as
its opposite. The commodity, however, must have this
general expression before it is alienated. This
necessity to express individual labour as general labour is
equivalent to the necessity of expressing a commodity as
money. The commodity receives this expression insofar
as the money serves as a measure and expresses the value of
the commodity in its price. It is only through
sale, through its real transformation into money, that the
commodity acquires its adequate expression as
exchange-value. The first transformation is merely a
theoretical process, the second is a real one.

||821| Thus, in considering
the existence of the commodity as money, it is not
only necessary to emphasise that in money commodities
acquire a definite measure of their value—since
all commodities express their value in the use-value of
the same commodity—but that they all become
manifestations of social, abstract, general labour; and as
such they all possess the same form, they all appear as the
direct incarnation of social labour and as such they all act
as social labour, that is to say, they can be directly
exchanged for all other commodities in proportion to the
size of their value; whereas in the hands of the people
whose commodities have been transformed into money, they
exist not as exchange-value in the form of a particular
use-value, but as use-value (gold, for example) which merely
represents exchange-value. A commodity may be sold
either below or above its value. This is purely a
matter of the magnitude of its value. But
whenever a commodity is sold, transformed into money, its
exchange-value acquires an independent existence, separate
from its use-value. The commodity now exists only as a
certain quantity of social labour-time, and it proves that
it is such by being directly exchangeable for any
commodity whatsoever and convertible (in proportion to its
magnitude) into any use-value whatsoever. This point
must not be overlooked in relation to money any more than
the formal transformation undergone by the labour a
commodity contains as its element of value. But an
examination of money—of that absolute exchangeability
which the commodity possesses as money, of its absolute
effectiveness as exchange-valuewhich has nothing to do with the magnitude of
value—shows that it is not quantitatively, but
qualitatively determined and that as a result of the
very process through which the commodity itself passes, its
exchange-value becomes independent, and is really
represented as a separate aspect alongside its use-value as
it is already nominally in its price.

This shows, therefore, that the “verbal
observer” understands as little of the value and the
nature of money as Bailey, since both regard the independent
existence of value as a scholastic invention of
economists. This independent existence becomes even
more evident in capital, which, in one of its aspects, can
be called value in process—and since value only
exists independently in money, it can accordingly be called
money in process, as it goes through a series of
processes in which it preserves itself, departs from itself,
and returns to itself increased in volume. It goes
without saying that the paradox of reality is also reflected
in paradoxes of speech which are at variance with common
sense and with what vulgarians mean and believe they are
talking of. The contradictions which arise from the
fact that on the basis of commodity production the labour of
the individual presents itself as general social labour, and
the relations of people as relations between things and as
things—these contradictions are innate in the
subject-matter, not in its verbal expressions.}

Ricardo often gives the impression, and sometimes indeed
writes, as if the quantity of labour is the solution to the
false, or falsely conceived problem of an “invariable
measure of value” in the same way as corn, money,
wages, etc., were previously considered and advanced as
panaceas of this kind, In Ricardo’s work this false
impression arises because for him the decisive task is the
definition of the magnitude of value. Because of this
he does not understand the specific form in which labour is
an element of value, and fails in particular to grasp that
the labour of the individual must present itself as abstract
general labour and, in this form, as social
labour. Therefore he has not understood that the
development of money is connected with the nature of value
and with the determination of this value by labour-time.

Bailey’s book has rendered a good service insofar as the
objections he raises help to clear up the confusion between
“measure of value” expressed in money as a
commodity along with other commodities, and the immanent
measure and substance of value. But if he had analysed
money as a “measure of value”, not only
as a quantitative measure but as a qualitative
transformation of commodities, he would have arrived at a
correct analysis of value. Instead of this, he
contents himself with a mere superficial consideration of
the external “measure of value”—which
already presupposes value—and remains rooted in a
purely frivolous approach to the question.

||822| There are, however,
occasional passages in Ricardo in which he directly
emphasises that the quantity of labour embodied in a
commodity constitutes the immanent measure of the
magnitude of its value, of the differences in the
amount of its value, only because labour is the factor
the different commodities have in common, which
constitutes their uniformity, their substance, the intrinsic
foundation of their value. The thing however he failed
to investigate is the specific form in which labour plays
that role.

“In making labour the
foundation of the value of commodities, and
the comparative quantity of labour which is necessary
to their production, the rule which determines the
respective quantities of goods which shall be given in
exchange for each other, we must not be supposed to deny the
accidental and temporary deviations of the actual or market
price of commodities from this, their primary and natural
price” ([David Ricardo, The Principles of Political
Economy, and Taxation,] third ed., 1821, p. 80).

Destutt de Tracy says that “To
measure … is to find how many times they” (the
things measured) “contain […] unities of the
same description. A franc is not a measure of
value for any thing, but for a quantity of the same
metal of which francs are made, unless francs, and the
thing to be measured, can be referred to some other
measure which is common to
both. This, I think, they can be, for they are
both the result of labour; and, therefore”
(because labour is their effective cause) “labour is a
common measure, by which their real as well as
their relative value may be estimated”
(op. cit., pp. 333-34).

All commodities can be reduced to labour as their common
element. What Ricardo does not investigate is the
specific form in which labour manifests itself as the
common element of commodities. That is why he does not
understand money. That is why in his work the
transformation of commodities into money appears to be
something merely formal, which does not penetrate deeply
into the very essence of capitalist production. He
says however: only because labour is the common factor of
commodities, only because they are all mere manifestations
of the same common element, of labour, is labour their
measure. It is their measure only because it forms
their substance as values. Ricardo does not
sufficiently differentiate between labour insofar as it is
represented in use-values or in exchange-value. Labour
as the foundation of value is not any particular labour,
with particular
qualities. Ricardo continuously confuses the labour
which is represented in use-value and that which is
represented in exchange-value. It is true that the
latter species of labour is only the former species
expressed in an abstract form.

By real value, Ricardo, in the passage cited
above, understands the commodity as the embodiment of a
definite amount of labour-time. By relative
value, he understands the labour-time the commodity
contains expressed in the use-values of other
commodities.

Now to Bailey.

Bailey clings to the form in which the exchange-value of
the commodity—as commodity—appears, manifests
itself. It manifests itself in a general form
when it is expressed in the use-value of a third commodity,
in which all other commodities likewise express their
value—a commodity which serves as money—that
is, in the money price of the commodity. It
manifests itself in a particular form when the
exchange-value of any particular commodity is expressed in
the use-value of any other, that is, as the corn price,
cotton price, etc. In actual fact, the
exchange-value of the commodity always appears, manifests
itself with regard to other commodities, only in the
quantitative relationship in which they
exchange. The individual commodity as such cannot
express general labour-time, or it can only express it in
its equation with the commodity which constitutes money, in
its money price. But then the value of
commodity A is always expressed in a certain quantity of the
use-value of the commodity which functions as money.

This is how matters appear directly. And
Bailey clings to this. The most superficial form of
exchange-value, that is the quantitative relationship
in which commodities exchange with one another,
constitutes, according to Bailey, their value.
The advance from the surface to the core of the problem is
not permitted. He even forgets the simple
consideration that if y yards of linen equal x
lbs. of straw, this [implies] a parity between two unequal
things—linen and straw—making them equal
magnitudes. This existence of theirs as things that
are equal must surely be different ||823| from their existence as straw
and linen. It is not as straw and linen that they are
equated, but as equivalents. The one side of the
equation must, therefore, express the same value as the
other. The value of straw and linen must, therefore,
be neither straw nor linen, but something common to both and
different from both commodities considered as straw
and linen. What is it? He does not answer
this question. Instead, he wanders off into all the
categories of political economy in order to repeat the same
monotonous litany over and over again, namely, that value is
the exchange relation of commodities and consequently is not
anything different from this relation.

“If the value of an
object is its power of purchasing, there must be
something to purchase. Value denotes
consequently nothing positive or intrinsic, but
merely the relation in which two objects stand to
each other as exchangeable commodities”
([Samuel Bailey, A Critical Dissertation an the Nature,
Measures, and Causes of Value, London, 1825,]
pp. 4-5).

His entire wisdom is, in fact, contained in this
passage. “If value is nothing but
power of purchasing” (a very fine definition
since “purchasing” presupposes not only value,
but the representation of value as “money”),
“it denotes”, etc. However let us first
clear away from Bailey’s proposition the absurdities which
have been smuggled in. “Purchasing” means
transforming money into commodities. Money already
presupposes value and the development of value.
Consequently, out with the expression
“purchasing” first of all. Otherwise we
are explaining value by value. Instead of purchasing
we must say “exchanging against other
objects”. It is quite superfluous to say that
“there must be something to purchase”. If
the “object” was to be consumed by its producers
as a use-value, if it was not merely a means of
appropriating other objects, not a “commodity”,
then obviously there could be no question of value.

First, it is a matter of objects. But then the
relation “in which two objects stand to each
other” is transformed into “the relation in
which two objects stand to each other as exchangeable
commodities”. After all, the objects stand only
in relation of exchange or as exchangeable objects to each
other. That is why they are
“commodities”, which is something
different from “objects”. On the other
hand, the “relation of exchangeable commodities”
is either nonsense, since “not exchangeable
objects” are not commodities, or Mr. Bailey has beaten
himself. The objects are not to be exchanged in any
arbitrary proportion, but are to be exchanged as
commodities, that is, they are to stand to one another as
exchangeable commodities, that is, as objects each of which
has a value, and which are to be exchanged with one another
in proportion to their equivalence. Bailey
thereby admits that the rate at which they are exchanged,
that is, the power of each of the commodities to purchase
the other, is determined
by its value, but this value however is not
determined by this power, which is merely a corollary.

If we strip the passage of everything that is wrong,
nonsensical or smuggled in, then it will read like this.

But wait: we must dispose of yet another snare and piece
of nonsense. We have two sorts of expression. An
object’s “power” of exchanging, etc. (since the
term “purchasing” is unjustified and makes no
sense without the concept of money), and the
“relation in which” an object exchanges
with others. If “power” is to be regarded
as something different from “relation”, then one
ought not to say that “power of exchanging” is
“merely the relation”, etc. If it
is meant to be the same thing, then it is confusing
to describe the same thing with two different expressions
which have nothing in common with each other. The
relation of a thing to another is a relation of the
two things and cannot be said to belong to either.
Power of a thing, on the contrary, is something
intrinsic to the thing, although this, its intrinsic
quality, may only ||824|
manifest itself in its relation to other things. For
instance, power of attraction is a power of the thing itself
although that power is “latent” so long as there
are no things to attract. Here an attempt is made to
represent the value of the “object” as something
intrinsic to it, and yet as something merely existing as a
“relation”. That is why Bailey uses first
the word “power” and then the word
“relation”.

Accurately expressed it would read as follows:

“If the value of an object is
the relation in which it exchanges with other objects, value
denotes, consequently” (viz., in consequence of
the “if”), “nothing but the relation in
which two objects stand to each other as exchangeable
objects.”

Nobody will contest this tautology. What follows
from it, by the way, is that the “value” of an
object “denotes nothing”. For
example, 1 lb. of coffee=4 lbs. of cotton. What then
is the value of 1 lb. of coffee? 4 lbs. of
cotton. And of 4 lbs. of cotton? 1 lb. of
coffee, Since the value of 1 lb. of coffee is 4 lbs. of
cotton, and, on the other hand, the value of 4 lbs. of
cotton is 1 lb. of coffee, then it is clear that the value
of 1 lb. of coffee is 1 lb. of coffee (since 4 lbs. of
cotton=1 lb. of coffee), a=b, b=a, hence
a=a. What arises from this explanation is,
therefore, that the value of a use-value is equal to a
[certain] quantity of the same use-value.
Consequently, the value of 1 lb. of coffee is nothing else
than 1 lb. of coffee. If 1 lb. of coffee=4 lbs. of
cotton, then it is
clear that 1 lb. of coffee > 3 lbs. of cotton and 1
lb. of coffee < 5 lbs. of cotton. To say that 1
lb. of coffee > 3 lbs. of cotton and < 5 lbs. of
cotton, expresses a relation between coffee and
cotton just as well as saying that 1 lb. of coffee=4 lbs.
of cotton. The symbol = does not express any more of a
relation than does the symbol > or the symbol <, but
simply a different relation. Why is it then
precisely the relation represented by the sign of equality,
by =, which expresses the value of the coffee in cotton and
that of the cotton in coffee? Or is this sign of
equality the result of the fact that these two amounts
exchange for one another at all? Does this sign =
merely express the fact of exchange? It cannot be
denied that if coffee exchanges for cotton in any proportion
whatever, they are exchanged for one another, and if the
mere fact of their exchange constitutes the relation
between the commodities, then the value of the coffee is
equally well expressed in cotton whether it exchanges for 2,
3, 4 or 5 lbs. of cotton. But what is then the word
“relation” supposed to mean? Coffee
in itself has no “intrinsic positive” quality
which determines the rate at which it exchanges for
cotton. It is not a relation which is determined by
any kind of determinant intrinsic to coffee and separate
from real exchange. What is then the purpose of the
word “relation”? What is the
relation? The quantity of cotton against which a
quantity of coffee is exchanged. Then one could not
speak of a relation in which it exchanges but only of a
relation in which it is or has been exchanged.
For if the relation were determined before the exchange,
then the exchange would be determined by “the
relation” and not the relation by the exchange.
We must therefore drop the relation as signifying
something which stands over and above the coffee and
the cotton and is distinct from them.

[Thus the passage from Bailey cited above takes the
following form:]

“If the value of an object is
the quantity of another object exchanged with it, value
denotes, consequently, nothing but the quantity of the other
object exchanged with it.”

As a commodity, a commodity can only express its value in
other commodities, since general labour-time does not exist
for it as a commodity. [Bailey believes that] if the
value of one commodity is expressed in another commodity,
the value of one commodity is nothing apart from this
equation with another commodity. Bailey flaunts this
piece of wisdom tirelessly—and
all the more tiresomely. As he conceives it, it is a
tautology, for he says [in essence]: If the value of
any commodity is nothing but its exchange relation with
another commodity, it is nothing apart from this
relation.

He reveals his philosophical profundity in the following
passage:

“As we cannot speak of the
distance of any object without implying some other
object, between which and the former this relation
exists, so we cannot speak of the value of a commodity
but in reference to another commodity||825|compared with it.
A thing cannot be valuable in itself without reference to
another thing” (Is social labour, to which the value
of a commodity is related, not another thing?)
“any more than a thing can be distant in itself
without reference to another thing” (loc. cit.,
p. 5).

If[p] a thing is
distant from another, the distance is in fact a relation
between the one thing and the other; but at the same time,
the distance is something different from this relation
between the two things. It is a dimension of space, it
is a certain length which may as well express the distance
of two other things besides those compared. But this
is not all. If we speak of the distance as a relation
between two things, we presuppose something
“intrinsic”, some “property” of the
things themselves, which enables them to be distant from
each other. What is the distance between the syllable
A and a table? The question would be
nonsensical. In speaking of the distance of two
things, we speak of their difference in space. Thus we
suppose both of them to be contained in space, to be points
of space. Thus we equalise them as being both
existences of space, and only after having them equalised
sub specie spatii[q] we distinguish them as
different points of space. To belong to space is their
unity.*

But what is this unity of objects exchanged against each
other? This exchange is not a relation which exists
between them as natural things. It is likewise not a
relation which they bear as natural things to human needs,
for it is not the degree of their utility that determines
the quantities in which they exchange. What is
therefore their identity, which enables them to be exchanged
in certain proportions for one another? As what do
they become exchangeable?

In fact, in all this Bailey merely follows the author of
the Verbal Observations.

“… it” (value)
“cannot alter as to one of the objects compared,
without altering as to the other…” (loc.
cit., p. 5).

This again simply means that the expression of the value
of one commodity in another commodity can only change as
such an expression. And the expression as such
presupposes not one but two commodities.

Mr. Bailey is of the opinion that if one were to consider
only two commodities—in exchange with one
another—one would automatically discover the mere
relativity of value, in his sense. The
fool. As if it were not just as necessary to say, in
connection with [two] commodities which exchange with one
another—two products which are related to one another
as commodities—in what they are identical, as
it would be in the case of a thousand. For that
matter, if only two products existed, the products would
never become commodities, and consequently the
exchange-value of commodities would never evolve
either. The necessity for the labour in product I to
manifest itself as social labour would not arise.
Because the product is not produced as an immediate object
of consumption for the producers, but only as a bearer of
value, as a claim, so to speak, to a certain
quantity
of all materialised social labour, all products as
values are compelled to assume a form of existence
distinct from their existence as use-values, And it is this
development of the labour embodied in them as social labour,
it is the development of their value, which
determines the formation of money, the necessity for
commodities to represent themselves in respect of one
another as money—which means merely as
independent forms of existence of exchange-value—and
they can only do this by setting apart one commodity
from the mass of commodities, and all of them measuring
their values in the use-value of this excluded commodity,
thereby directly transforming the labour embodied in this
exclusive commodity into general, social labour.

Mr. Bailey, with his queer way of thinking which only
grasps the surface appearance of things, concludes on the
contrary: Only because, besides commodities,
money exists, and we are so used to regarding the
value of commodities not in their relation to one
another but as a relation to a third, as ||826| a third relation distinct from
the direct relation, is the concept of value
evolved—and consequently value is transformed from the
merely quantitative relation in which commodities are
exchanged for one another into something independent of this
relation (and this, he thinks, transforms the value of
commodities into something absolute, into a scholastic
entity existing in isolation from the commodities).
According to Bailey, it is not the determination of the
product as value which leads to the establishment of money
and which expresses itself in money, but it is the
existence of money which leads to the fiction of the concept
of value. Historically it is quite correct that the
search for value is at first based on money, the
visible expression of commodities as value, and that
consequently the search for the definition of value is
(wrongly) represented as a search for a commodity of
“invariable value”, or for a commodity which is
an “invariable measure of value”. Since
Mr. Bailey now demonstrates that money as an external
measure of value—and expression of value—has
fulfilled its purpose, even though it has a variable
value, he thinks he has done away with the question of the
concept of value—which is not affected by the
variability of the magnitudes of value of
commodities—and that in fact it is no longer necessary
to attribute any meaning at all to value. Because the
representation of the value of a commodity in money—in
a third, exclusive commodity—does not exclude
variation in the value of this third commodity, because the
problem of an “invariable
measure of value” disappears, the problem of the
determination of value itself disappears. Bailey
carries on this insipid rigmarole for hundreds of pages,
with great self-satisfaction.

The following passages, in which he constantly repeats
the same thing, are, in part, illicitly copied from the
“Verbal Disputes”.

Supposing that only two commodities
existed, both exchangeable in proportion to the amount of
labour [they contained], “If […] A should, at
a subsequent period, require double the quantity of labour
for its production, while B continued to require only the
same, A would become of double value to B… But
although B continued to be produced by the same labour, it
would not continue of the same value, for it would exchange
for only half the quantity of A, the only commodity,
by the supposition, with which it could be compared”
(loc. cit., p. 6).

“It is from this circumstance of
constant reference to other commodities” (instead
of regarding value merely as a relation between two
commodities) “or to money, when we are
speaking of the relation between any two commodities,
that the notion of value, as something intrinsic
and absolute, has arisen” (op. cit., p. 8).

“What I assert is, that if all
commodities were produced under exactly the same
circumstances, as for instance, by labour alone, any
commodity, which always required the same quantity of
labour, could not be invariable in value”
<that is, invariable when its value is expressed
in other commodities—a tautology> “while
every other commodity underwent alteration” (op. cit.,
pp. 20-21).

“It is impossible to designate, or expressthe value of a
commodity, except by a quantity of some other
commodity” (op. cit., p. 26).

(As impossible as it is to “designate”
or “express” a thought except by a
quantity of syllables. Hence Bailey concludes that a
thought is—syllables.)

“Instead of regarding value as a
relation between two objects, they” (Ricardo
and his followers) “seem to consider it as a positive
result produced by a definite quantity of labour”
(op. cit., p. 30).

“Because the values of A and B,
according to their doctrine, are to each other as the
quantities of producing labour, or … are determined
by the quantities of producing labour, they appear to have
concluded, that the value of A alone, without reference to
any thing else, is as the quantity of its producing
labour. There is no meaning certainly in this last
proposition…” (op. cit., pp. 31-32).

They speak of “value as a sort of
general and independent property” (op. cit.,
p. 35).

“The value of a commodity must be its
value in something” (loc. cit.).

We can see why it is so important for Bailey to limit
value to two commodities, to understand it as the
relation between two commodities, But a difficulty
now arises:

“The value of a commodity
denoting its relation of exchange to some other
commodity”

(what is in this context the purpose of the
“relation ||827| of
exchange”? Why not its
“exchange”? But at the same time exchange
is intended to express a definite relation, not
merely the fact of exchange, Hence value is equal to
relation in exchange)

“… we may speak of it as
money-value, corn-value, cloth-value, according to the
commodity with which it is compared; and hence there are
a thousand different kinds of value, as many kinds of
value as there are commodities in existence, and all are
equally real and equally nominal” (op.
cit., p.39).

Here we have it. Value equals
price. There is no difference between
them. And there is no “intrinsic”
difference between money price and any other
expression of price, although it is the money price
and not the cloth price, etc., which expresses the
nominal value, the general value of the
commodity.

But although the commodity has a thousand different kinds
of value, or a thousand different prices, as many kinds of
value as there are commodities in existence, all these
thousand expressions always express the same
value. The best proof of this is that all these
different expressions are equivalents which not only
can replace one another in this expression, but do replace
one another in exchange itself. This relation
of the commodity, with the price of which we are concerned,
is expressed in a thousand different “relations in
exchange” to all the different commodities and yet
always expresses the same relation. Thus this
relation, which remains the same, is distinct from its
thousand different expressions, or value is different from
price, and the prices are only expressions of value:
money price is its general expression, other prices
are particular expressions. It is not even this
simple conclusion that Bailey arrives at. In this
context Ricardo is not a fictionist but Bailey is a
fetishist in that he conceives value, though not as a
property of the individual object (considered in isolation),
but as a relation of objects to one another, while it
is only a representation in objects, an objective
expression, of a relation between men, a social relation,
the relationship of men to their reciprocal productive
activity.

[β) Confusion with Regard to Profit and the
Value of Labour]

“Hence Mr. Ricardo, ingeniously
enough, avoids a difficulty, which, on a first view,
threatens to encumber his doctrine, that value depends on
the quantity of labour employed in production. If this
principle is rigidly adhered to, it follows, that the
value of labour depends on the quantity of labour
employed in producing it—which is evidently
absurd. By a dexterous turn, therefore, Mr. Ricardo
makes the value of labour depend on the quantity
of labour required to produce wages, or, to give him the
benefit of his own language, he maintains, that the value of
labour is to be estimated by the quantity of labour
required to produce wages, by which he means, the quantity
of labour required to produce the money or commodities given
to the labourer. This is similar to saying, that the
value of cloth is to be estimated, not by the quantity of
labour bestowed on its production, but by the quantity of
labour bestowed on the production of the silver for which
the cloth is exchanged” (op. cit., pp. 50-51).

This is a justified criticism of Ricardo’s mistake of
making capital exchange directly with labour instead of with
labour-power. It is the same objection which we have
already come across in another form.[s] Nothing else. Bailey’s
comparison cannot be applied to labour-power. It is
not cloth, but an organic product such as mutton, that he
ought to compare with living lab our-power. Apart from
the labour involved in tending live-stock and that required
for the production of their food, the labour required for
their production is not to be understood as meaning the
labour which they themselves perform in the act of
consumption, the act of eating, drinking, in short, the
appropriation of those products or means of
subsistence. It is just the same with
labour-power. [What does] the labour required for its
production consist of? Apart from the labour involved
in developing a person’s labour—power, his
education, his apprenticeship—and this hardly
arises in relation to unskilled labour—its
reproduction costs no labour apart from that involved in the
reproduction of the means of subsistence which the labourer
consumes. The appropriation of these means of
subsistence is not “labour”. ||828| Any more than the labour
contained in the cloth, in addition to the labour of the
weaver and the labour which is contained in the wool, the
dye-stuff, etc., comprises the chemical or physical action
of the wool in absorbing the dye-stuff,
etc., an action which corresponds to the
appropriation of the means of subsistence by the worker or
the cattle.

Bailey then seeks to invalidate Ricardo’s law that the
value of labour and profit stand in inverse
proportion to one another. He seeks, moreover, to
invalidate that part of it which is correct. Like
Ricardo, he identifies surplus-value with profit. He
does not mention the one possible exception to this law,
namely, when the working-day is lengthened and workers and
capitalists share equally in that prolongation, but even
then, since the value of the working power will be consumed
more quickly—in fewer years—the surplus-value
rises at the expense of the working-man’s life, and his
working power depreciates in comparison with the
surplus-value it yields to the capitalist.

Bailey’s reasoning is most superficial. Its
starting-point is his conception of value. The value
of the commodity is the expression of its value in a certain
quantity of other values in use (the use-value of other
commodities). The value of labour is thus equal to the
quantity of other commodities (use-values) for which it is
exchanged. (The real problem, how it is possible to
express the value in exchange of A in the value in use of
B—does not even occur to him.) So long,
therefore, as the worker receives the same quantity of
commodities, the value of labour remains unchanged, because,
as before, it is expressed in the same quantity of other
useful things. Profit, on the other hand, expresses a
relation to capital, or else to the total product. The
portion received by the worker can, however, remain
the same although the proportion received by the
capitalist rises if the productivity of labour
increases. It is not clear why, in dealing with
capital, we suddenly come to a proportion and of what use
this proportion is supposed to be to the capitalist,
since the value of what he receives is determined not by the
proportion, but by its “expression in other
commodities”.

The point he makes here has, in fact, already been
mentioned by Malthus.[t] Wages are equal to a quantity of
use-values. Profit, on the other hand, is (but
Bailey must avoid saying so) a relation of
value. If I measure wages according to
use-value and profit according to exchange-value, it is
quite evident that neither an inverse nor any other kind of
relation exists between them, because I should then be
comparing incommensurable magnitudes, things which have
nothing in common.

But what Bailey says here about the value of
labour applies—according to his
principle—to the value of every other commodity
as well. It is nothing but a certain quantity of other
things exchanged against it. If I receive 20 lbs. of
twist for £1, then [according to this theory] the
value of the £1 always remains the same, and will
therefore be always paid, although the labour required to
produce 1 lb. of twist can on one occasion be double that
required on another. The most ordinary merchant does
not believe that he is getting the same value for his
£1 when he receives 1 quarter of wheat for it in a
period of famine and the same amount in a period of
glut. But the concept of value ends here. And
there remains only the unexplained and inexplicable fact
that a quantity of A is exchanged against a quantity of B in
an arbitrary proportion. And whatever that proportion
may be it is an equivalent. Even Bailey’s formula, the
value of A expressed in B, thus becomes quite
meaningless. If the value of A is expressed in B, the
same value is supposed to be expressed, at one time in A,
and at another time in B, so that, when it is expressed in
B, the value of A remains the same as it was before.
But according to Bailey there is no value of A that could be
expressed in B, because neither A nor B have a value apart
from that expression. The value of A expressed in B
must be something quite different from the value of A in C,
as different as B and C are. It is not the same
value, identical in both expressions, but there are two
relations of A which have nothing in common with each other,
and of which it would be nonsense to say that they are
equivalent expressions.[u]

||829| “… a
rise or fall of labour implies an increase or decrease in
the quantity of the commodity given in exchange for
it” (op. cit., p. 62).

Nonsense! [From Bailey’s standpoint] there can be
no rise or fall in the value of labour, nor in the value of
any other thing. For one A I get today 3 Bs, tomorrow
6 Bs and the day after tomorrow 2 Bs. But [according
to Bailey] in all these cases the value of A is nothing but
the quantity of B for which it has been exchanged. It
was 3 Bs, it is now 6 Bs. How can its value be said to
have risen or fallen? The A expressed in 3 Bs had a
different value from that expressed in 6 Bs or 2 Bs.
But then it is not the identical A which at the identical
time has been exchanged for
3 or 2 or 6 Bs. The identical A at the identical
time has always been expressed in the same quantity of
B. It is only with regard to different moments of time
that it could be said the value of A had changed. But
it is only with “contemporaneous” commodities
that A can be exchanged, and it is only the fact (not even
the mere possibility of exchange) of exchange with other
commodities which makes [according to Bailey] A a
value. It is only the actual “relation in
exchange” which constitutes its value; and the actual
“relation in exchange” can of course only take
place for the same A at the identical time. Bailey
therefore declares the comparison of commodity values at
different periods to be nonsense. But at the same time
he should also have declared the rise or fall of
value—which is impossible if there is no comparison
between the value of a commodity at one time and its value
at another time—to be nonsense and consequently, also,
the “rise or fall in the value of
labour”.

“Labour is an exchangeable thing, or
one which commands other things in exchange; but the term
profits denotes only a share or proportion of
commodities, not an article which can be exchanged against
other articles. When we ask whether wages have
risen, we mean, whether a definite portion of labour
exchanges for a greater quantity of other things than
before” (loc. cit., pp. 62-63).

(Thus when corn becomes dearer, the value of labour falls
because less corn is exchanged for it. On the other
hand, if cloth becomes cheaper at the same time, the value
of labour rises simultaneously, because more cloth
can be exchanged for it. Thus the value of labour both
rises and falls at the same time and the two expressions of
its value—in corn and in cloth—are not
identical, not equivalent, because its increased
value cannot be equal to its reduced value.)

“… but when we ask whether
profits have risen, we … mean … whether the
gain of the capitalist bears a higher ratio to the capital
employed…” (loc. cit., p. 63).

“… the value of labour does
not entirely depend on the proportion of the whole produce
which is given to the labourers in exchange for their
labour, but also on the productiveness of […]
labour” (loc. cit., pp. 63-64).

“The proposition, that when labour
rises profits must fall, is true only when its rise is not
owing to an increase in its productive powers”
(loc. cit., p. 64).

“… if this productive power be
augmented, that is, if the same labour produce more
commodities in the same time, labour may rise in value
without a fall, nay even with a rise of profits”
(loc. cit., p. 66).

(Accordingly it can also be said of every other commodity
that a rise in its value does not imply a fall in the value
of the other
commodity with which it exchanges, nay, may even imply a
rise in value on the other side. For instance,
supposing the same labour which produced 1 quarter of corn,
now produces 3 quarters. The 3 quarters cost £1,
as the one quarter did before. If 2 quarters are now
exchanged for £1, the value of money has risen,
because it is expressed in 2 quarters instead of one.
Thus the purchaser of corn gets a greater value for his
money. But the seller who sells for £1 what has
cost him only 2/3 [of £1] gains
1/3. And thus the value of his
corn has risen at the same time that the money price of corn
has fallen.)

||830|
“Whatever the produce of the labour of six men might
be, whether 100 or 200 or 300 quarters of corn, yet so long
as the proportion of the capitalist was one-fourth of the
produce, that fourth part estimated in labour would be
invariably the same.”

(And so would the 3/4 of the
produce accruing to the labourer, if estimated in
labour.)

“Were the produce 100 quarters, then,
as 75 quarters would be given to 6 men, the 25 accruing to
the capitalist would command the labour of 2 men;”

(and that given to the labourers would command the labour
of 6 men)

“if the produce were 300 quarters,
the 6 men would obtain 225 quarters, and the 75 falling to
the capitalist would still command 2 men and no
more.”

(Likewise the 225 quarters falling to the 6 men would
still command 6 men and no more.) (Why does the
almighty Bailey then forbid Ricardo to estimate the portion
of the men, as well as that of the capitalist, in labour,
and compare their mutual value as expressed in labour?)

“Thus a rise in the proportion which
went to the capitalist would be the same as an increase of
the value of profits estimated in labour,”

(How can he speak of the value of profits and an
increase in their value, if “profit … does not
denote an article which can be exchanged against other
articles” (see above) and, consequently, denotes no
“value”? And, on the other hand, is a rise
in the proportion which went to the capitalist
possible without a fall in the proportion that goes
to the labourer?)

“or, in other words, an increase in
their power of commanding labour” (op. cit.,
p. 69).

(And is this increase in the power of the
capitalist to appropriate the labour of others not exactly
identical with the decrease in the power of the
labourer to appropriate his own labour?)

“Should it be objected to the
doctrine of profits and the value of labour rising at the
same time, that as the commodity produced is the only
source whence the capita list and the labourer can obtain
their remuneration, it necessarily follows that what one
gains the other loses, the reply is obvious. So long
as the product continues the same, this is undeniably true;
but it is equally undeniable, that if the product be doubled
the portion of both may be increased, although the
proportion of one is lessened and that of the other
augmented” (loc. cit., p. 70).

(This is just what Ricardo says. The
proportion of both cannot increase, and if the
portion of both increases, it cannot increase in the
same proportion, as otherwise portion and proportion would
be identical. The proportion of the one cannot
increase without that of the other decreasing.
However, that Mr. Bailey calls the portion of the
labourer “value” of “wages”,
and the proportion [of the capitalist] value of
“profits”, in other words, that the same
commodity has two values for him, one in the hands of the
labourer, and the other in the hands of the capitalist, is
nonsense of his own.)

“So long as the product continues the
same, this is undeniably true; but it is equally undeniable,
that if the product be doubled the portion of both
may be increased, although the proportion of one is
lessened and that of the other augmented. Now it is an
increase in the portion of the product assigned to
the labourer which constitutes a rise in the value of
his labour…”

(because here we understand by value a certain
quantity of articles)

“… but it is an increase in
the proportion assigned to the capitalist which
constitutes a rise in […] profits,”

(because here we understand by value the same
articles not estimated by their quantity, but by the labour
worked up in them)

“whence”

(that is, because of the absurd use of two measures, in
the one case articles, in the other case the value of the
same articles)

“it clearly follows, that there is
nothing inconsistent in the supposition of a simultaneous
rise in both” (loc. cit., p. 70).

This absurd argument against Ricardo is quite ||831| futile since he merely
declares that the value of the two portions must
rise and fall in inverse proportion to one another.
It merely amounts to a repetition by Bailey of his
proposition that value is the quantity of articles
exchanged for an article. In dealing with
profit he was bound to find himself in an
embarrassing position. For here, the value of capital
is compared with the value of the product. Here he
seeks refuge in taking value to mean the value of an
article estimated in labour (in the Malthusian manner).

“Value is a relation between
contemporary commodities, because such only admit of
being exchanged for each other; and if we compare the value
of a commodity at one time with its value at another, it is
only a comparison of the relation in which it stood at these
different times to some other commodity” (op. cit.,
p. 72).

Consequently, as has been stated, value can neither rise
nor fall, for this always involves comparing the value of a
commodity at one time with its value at another. A
commodity cannot be sold below its value any more than above
it, for its value is what it is sold for. Value and
market price are identical. In fact one cannot speak
either of “contemporary” commodities, or
of present values, but only of past
ones. What is the value of 1 quarter of wheat?
The £1 for which it was sold yesterday. For its
value is only what one gets in exchange for it, and as long
as it is not exchanged, its “relation to money”
is only imaginary. But as soon as the exchange has
been transacted, we have £1 instead of the quarter of
wheat and we can no longer speak of the value of the quarter
of wheat. In comparing values at different periods,
Bailey has in mind merely academic researches into the
different values of commodities, for example in the
eighteenth and the sixteenth centuries. There the
difficulty arises from the fact that the same monetary
expression of value—owing to the vicissitudes of the
value of money itself—denotes different values [at
different times]. The difficulty here lies in reducing
the money price to value. But what a fool he is!
Is it not a fact that, in the process of circulation or the
process of reproduction of capital, the value of one period
is constantly compared with that of another period, an
operation upon which production itself is based?

Mr. Bailey does not understand at all what the
expressions—to determine the value of commodities by
labour-time or by the value of labour—mean. He
simply does not understand the difference.

“… I beg not to be understood
as contending, either that the values of commodities are to
each other as the quantities of labour necessary for
their production, or that the values of commodities are to
each other as the values
of the labour: all that I intend to insist
upon is, that if the former is true, the latter cannot be
false…” (op. cit., p. 92).

The determination of the value of commodities by the
value of another commodity (and insofar as they are
determined by the “value of labour”, they are
determined by another commodity; for value of labour
presupposes labour as a commodity) and its determination by
a third entity, which has neither value nor is itself a
commodity, but is the substance of value, and that which
turns products into commodities, are for Bailey
identical. In the first case, it is a question of a
measure of the value of commodities, that is, in
fact, of money, of a commodity in which the other
commodities express their value. In order that
this can happen, the values of the commodities must
already be presupposed. The commodity which
measures as well as that to be measured must have a
third element in common. In the second case,
this identity itself is first established; later it
is expressed in the price, either money price or any other
price.

Bailey identifies the “invariable measure of
value” with the search for an immanent measure of
value, that is, the concept of value itself. So long
as the two are confused it is even a reasonable instinct
which leads to the search for an “invariable measure
of value”. Variability is precisely the
characteristic of value. The term
“invariable” expresses the fact that the
immanent measure of value must not itself be a commodity, a
value, but rather something which constitutes value and
which is therefore also the immanent measure
of value. Bailey demonstrates ||832| that commodity values can find
a monetary expression and that, if the value relation of
commodities is given, all commodities can express their
value in one commodity, although the value of this
commodity may change. But it nevertheless always
remains the same for the other commodities at a given time,
since it changes simultaneously in relation to all of
them. From this he concludes that no value
relation between commodities is necessary nor is there any
need to look for one. Because he finds it reflected in
the monetary expression, he does not need to
“understand” how this expression becomes
possible, how it is determined, and what in fact it
expresses.

These remarks, in general, apply to Bailey as they do to
Malthus, since he believes that one is concerned with the
same question, on the same plane, whether one makes
quantity of labour or value of labour the measure of
value. In the latter case, one presupposes the
values whose measure is being sought, that is
to say, their external measure, their representation as
value. In the first case one investigates the genesis
and immanent nature of value itself. In the second,
the development of the commodity into money or the form
which exchange-value acquires in the process of the exchange
of commodities. In the first, we are concerned with
value, independent of this representation, or rather
antecedent to this representation. Bailey has
this in common with the other fools: to determine the value
of commodities means to find their monetary
expression, an external measure of their value.
They say, however, impelled by an instinctive thought, that
this measure then must have invariable value, and must
itself therefore stand outside the category of value,
whereas Bailey says that one does not need to understand it,
since one does in fact find the expression of value
in practice, and this expression itself has and can have
variable value without prejudice to its function.

In particular, he himself has informed us that 100, 200
or 300 quarters can be the product of the labour of 6 men,
that is, of the same quantity of labour, whereas
“value of labour” only means for him the portion
of the 100, 200 or 300 quarters which the 6 men
receive. This could be 50, 60 or 70 quarters per
man. The quantity of labour and the value of the same
quantity of labour are therefore, according to Bailey
himself, very different expressions. And how can it be
the same if the value is expressed first in one thing and
then in something essentially different? If the same
labour which formerly produced 3 quarters of corn now
produces 1 quarter, while the same labour which formerly
produced 20 yards of cloth (or 3 quarters of corn) still
produces 20 yards, then, reckoned according to labour-time,
1 quarter of corn is now equal to 20 yards of cloth, or 20
yards of cloth to 1 quarter of corn, and 3 quarters of corn
equal 60 yards of cloth instead of 20. Thus the values
of the quarter of corn and the yard of linen have been
altered relatively. But they have by no means been
altered according to the value of labour, for 1 quarter of
corn and 20 yards of cloth remain the same use-values as
before. And it is possible that 1 quarter of corn does
not command a larger quantity of labour than before.

If we take a single commodity, then Bailey’s assertion
makes no sense whatever. If the labour-time required
for the production of shoes decreases and now only one-tenth
of the labour-time formerly required is necessary, then the
value of shoes drops to one-tenth of the former value; and
this also holds true
when the shoes are compared with, or expressed in,
other commodities, provided the labour required for their
production has remained the same or has not decreased at the
same rate. Nevertheless, the value of labour—for
example the daily wage in shoemaking as well as in all other
industries—may have remained the same; or it may even
have increased. Less labour is contained in the
individual shoe, hence also less paid labour. But when
one speaks of the value of labour, one does not mean
that for one hour’s labour, i.e., for a smaller quantity of
labour, less is paid than for a greater quantity.
Bailey’s proposition could have meaning only in relation to
the total product of capital. Suppose 200 pairs of
shoes are the product of the same capital (and the same
labour) which formerly produced 100 pairs. In this
case, the value of the 200 pairs is the same as [previously]
that of 100 pairs. And it could be said that the 200
pairs of shoes are to 1,000 yards of linen (say the product
of £200 of capital) as the value of the labour
set in motion by the two amounts of capital. In what
sense? In the sense in which it would also
apply ||833| to the relation of
the individual shoe to the single yard of linen?

The value of labour is the part of the labour-time
contained in a commodity which the worker himself
appropriates; it is the part of the product in which the
labour-time which belongs to the worker himself is
embodied. If the entire value of a commodity is
reduced to paid and unpaid labour-time—and if the rate
of unpaid to paid labour is the same, that is, if
surplus-value constitutes the same proportion of total value
in all commodities—then it is clear that if the ratio
of one commodity to another is proportional to the total
quantity of labour they contain, they must also represent
equal proportionate parts of these total quantities
of labour, and their ratio must therefore also be as that of
the paid labour-time in one commodity to the paid
labour-time in the other.

C [commodity]: C’=TLT (total labour-time [embodied in C])
to TLT’ (total labour-time [embodied in C’]).
TLT/x= the paid labour-time in C, and TLT’/x=
the paid labour-time in C’, since it is presupposed that the
paid labour-time in both commodities constitutes the same
proportional part of the total labour-time.

or the commodities are to one another as the
quantities of paid labour-time contained in them, that
is, as the values of the labour contained in them.

The value of labour is then, however, not
determined in the way Bailey would like, but by the
labour-time [contained in the commodity].

Further, disregarding the conversion of values into
prices of production and considering only the values
themselves, capitals consist of different proportions of
variable and constant capital. Hence, as far as values
are concerned, the surplus-values are not equal, or the paid
labour does not form the same proportion of the total labour
advanced.

In general, wages—or values of labour—would
here be indices of the values of commodities, not as values,
not insofar as wages rise or fall, but insofar as the
quantity of paid labour—represented by
wages—contained in a commodity would be an index of
the total quantity of the labour contained in the
corresponding commodities.

In a word, the point is that, if the values of
commodities are to one another as LT to LT’ (the amounts of
labour-time contained in them), then their ratio is likewise
as LT/x to LT’/x, i.e., the amounts of paid
labour-time embodied in them, if the proportion of
the paid labour-time to the unpaid is the same in all
commodities, that is, if the paid labour-time is
always equal to the total labour-time, whatever this may be,
divided by x. But the “if” does not
correspond to the real state of affairs. Supposing
that the workers in different industries work the same
amount of surplus labour-time, the relation of paid to
actually employed labour-time is nevertheless different in
different industries, because the ratio of immediate
labour employed to accumulated labour employed is
different. [Let us take two capitals consisting] for
example, the one of 50v [variable] and 50c [constant] and
the other of 10v and 90c. In both cases, let the
unpaid labour amount to one-tenth. [The value of] the
first commodity would accordingly be 105, [of] the second
101. The paid labour-time would be equal to one-half
of the labour advanced in the first case, and only to
one-tenth in the second.

“… if commodities are to each
other as the quantities, they must also be to each other as
the va1ues of the producing labour; for the contrary would
necessarily imply, that the two commodities A and B might be
equal in value, although the value of the labour employed in
one was greater or less than the value of the labour
employed in the other; or that A and B might be unequal in
value, if the labour employed in each was equal in
value. But this difference in the value of two
commodities, which were produced by labour of equal
value, would be inconsistent with the acknowledged
equality of profits, which Mr. Ricardo maintains in
common with other writers” (op. cit., pp.
79-80).

In this last phrase, Bailey stumbles unconsciously on a
real objection to Ricardo, who directly identifies profit
with surplus-value and values with cost-prices.
Correctly stated, it is-if the commodities are sold at their
value, they yield unequal profits, for then
profit is equal to the surplus-value embodied in them.
And this is correct. But this objection does not refer
to the theory of value, but to a blunder of Ricardo’s in
applying this theory.

How little Bailey himself, in the above passage, can have
correctly understood the problem, is shown in the following
statement:

Ricardo on the other hand maintains “that labour
may rise and fall in value without affecting the value of
the commodity. This is obviously a very different
proposition from the other, and depends in fact on the
falsity of the other, or on the contrary proposition”
(loc. cit., p. 81).

The fool himself previously asserted that the result of
the same labour may be 100, 200 or 300 quarters [of
corn]. This determines the relation of a quarter to
other commodities irrespective of the changing value of
labour, that is, irrespective of how much of the 100, 200 or
300 quarters falls to the labourer himself. The fool
would have shown some consistency if he had said: the values
of labour may rise or fall, nevertheless the values of
commodities are as the values of labour,
because—according to a false assumption—the rise
or fall of wages is general, and the value of wages always
forms the same proportionate part of the total
quantity of labour employed.

[γ) Confusion of Value and Price. Bailey’s
Subjective Standpoint]

[Bailey says:]

“…the capability of
expressing the values of commodities has nothing to
do with the constancy of their
values…”

<Indeed not! but it has much to do with first
finding the value, before expressing it; finding in what way
the values in use, so different from each other, fall under
the common category and denomination of value, so
that the value of one commodity may be expressed in the
other>

“… either to each other or to
the medium employed; neither has the capability of comparing
these expressions of value anything to do with
it.”

<If the values of different commodities are expressed
in the same third commodity, however variable its value may
be, it is of course very easy to compare these
expressions, which already have a common
denomination.>

“Whether A is worth 4 B or 6
B”

<the difficulty consists in equating A with a portion
of B; and this is only possible if there exists a common
element for A and B, or if A and B are different
representations of the same element. If all
commodities are to be expressed in gold, or money, the
difficulty remains the same. There must be an element
common to gold and to each of the other commodities>

“… and whether C is worth 8 B
or 12 B, are circumstances which make no difference in
the power of expressing the value of A and C in B, and
certainly no difference in the power of comparing the value
of A and C when expressed” (op. cit., pp. 104-05).

But how [is it possible] to express A in B or
C? In order to express “ them” in
each other, or, what amounts to the same thing, to treat
them as equivalent expressions of the same unity, A, B, C
must all be considered as something different from what they
are as things, as products, as values in use. A=4
B. Then the value of A is expressed in 4 B, and
the value of 4 B in A, so that both sides express the
same. They are equivalents. They are both
equal expressions of value. It would be the
same if they were unequal ones or A greater than 4 B, A
smaller than 4 B. In all these cases they are, insofar
||835| as they are values, only
different or equal in quantity, but they are always
quantities of the same quality. The difficulty is to
find this quality.

“The requisite condition in the
process is, that the commodities to be measured should be
reduced to a common denomination”

<for example, in order to compare a triangle with
any of the other polygons it is only necessary to transform
the latter into triangles, to express them in
triangles. But to do this the triangle and the polygon are in fact supposed to
be something identical, different figures of the same
thing—space>

“… which may be done at all
times with equal facility; or rather it is ready done
to our hands, since it is the prices of commodities
which are recorded, or their relations in value to
money” (op. cit., p. 112).

“Estimating value is the same
thing as expressing it…” (op. cit.,
p. 152).

We have the fellow here. We find the values
measured, expressed in the prices. We can
therefore [asserts Bailey] content ourselves with not
knowing what value is. He confuses the development of
the measure of value into money and further the development
of money as the standard of price with the discovery of the
concept of value itself in its development as the
immanent measure of commodities in exchange. He is
right in thinking that this money need not be a commodity of
invariable value; from this he concludes that no separate
determination of value independent of the commodity itself
is necessary.

As soon as the value of commodities, as the element they
have in common, is given, the measurement of their relative
value and the expression of this value coincide. But
we can never arrive at the expression so long as we
do not find the common factor, which is different from the
immediate existence of the commodities.

This is shown by the very example he gives, the distance
between A and B.[v]
When one speaks of their distance one already presupposes
that they are points (or lines) in space. Having been
reduced to points, and points of the same line, their
distance may be expressed in inches, or feet, etc. The
element the two commodities A and B have in common is, at
first sight, their exchangeability. They are
“exchangeable” objects. As
“exchangeable” objects they are
magnitudes of the same denomination. But this
“their” existence as “exchangeable”
objects must be different from their existence as values in
use. What is it?

Money is already a representation of value, and
presupposes it. As the standard of price money,
for its part, already presupposes the (hypothetical)
transformation of the commodity into money. If the
values of all commodities are represented in money prices,
then one can compare them, they are in fact already
compared. But for the value to be represented as
price, the value of commodities must have been expressed
previously as money. Money is merely the form in which
the value of commodities
appears in the process of circulation. But how can
one express x cotton in y money? This question
resolves itself into this—how is it at all possible to
express one commodity in another, or how to present
commodities as equivalents? Only the elaboration of
value, independent of the representation of one commodity in
another, provides the answer.

It is a “… mistake … that
the relation of value can exist between commodities at
different periods, which is in the nature of the case
impossible; and if no relation exists there can be no
measurement of it” (op. cit., p. 113).

We have already had the same nonsense before.[w] “The relation
of value between commodities at different periods”
already exists when money acts as means of payment.
The whole circulation process is a perpetual comparison of
values of commodities at different periods.

“… if […] it”
(money) “is not a good medium of comparison between
commodities at different periods [it asserts] its
incapability of performing a function in a case where there
is no function for it to perform”[x] (op. cit., p. 118).

Money has this function to perform as means of payment
and as treasure.

All this is simply copied from the “verbal
observer” and in fact the secret of the whole
nonsense oozes out in the following phrase which has also
convinced me that the Verbal Observations,[y] which
were very carefully concealed by Bailey, were used by him in
the manner of a plagiarist.

||836| “Riches are the
attribute of men, value is the attribute of
commodities. A man or a community is rich; a pearl or
a diamond is valuable” (op. cit., p. 165).

A pearl or a diamond is valuable as a pearl or a
diamond, that is, by their qualities, as values in use for
men, that is, as riches. But there is nothing
in a pearl or a diamond by which a relation of exchange
between them is given, etc.

Bailey now becomes a profound philosopher:

Difference between labour as cause and
measure, and in general between cause and
measure of value (op. cit., p. 170 et seq.).[z]

There is, in actual fact, a very significant difference
(which Bailey does not notice) between “measure”
(in the sense of money) and “cause of
value”. The “cause” of value
transforms use-values into value. The external
measure of value already presupposes the existence of
value. For example, gold can only measure the
value of cotton if gold and cotton—as
values—possess a common factor which is
different from both. The “cause” of value
is the substance of value and hence also its immanent
measure.

“Whatever circumstances … act
with assignable influence, whether mediately or immediately,
on the mind in the interchange of commodities, may be
considered as causes of value” (op. cit.,
pp. 182-83).

This in fact means nothing more than: the cause of
the value of a commodity or of the fact that two commodities
are equivalent are the circumstances which cause the seller,
or perhaps both the buyer and the seller, to consider
something to be the value or the equivalent of a
commodity. The “circumstances” which
determine the value of a commodity are by no means further
elucidated by being described as circumstances which
influence the “mind” of those engaging in
exchange, as circumstances which, as such, likewise exist
(or perhaps they do not, or perhaps they are incorrectly
conceived) in the consciousness of those engaging in
exchange.

These same circumstances (independent of the mind, but
influencing it), which compel the producers to sell their
products as commodities—circumstances which
differentiate one form of social production from
another—provide their products with an exchange-value
which (also in their mind) is independent of their
use-value. Their “mind”, their
consciousness, may be completely ignorant of, unaware of the
existence of, what in fact determines the value of their
products or their products as values. They are placed
in relationships which determine their thinking but they may
not know it. Anyone can use money as money without
necessarily understanding what money is. Economic
categories are reflected in the mind in a very distorted
fashion. He [Bailey] transfers the problem into the
sphere of consciousness, because his theory has got
stuck.

Instead of explaining what he himself understands by
“value” (or “cause of value”) Bailey
tells us that it is something which buyers and sellers
imagine in the act of exchange.

In fact, however, the following considerations are the
basis of the would-be philosophical proposition.

1) The market price is determined by various
circumstances which express themselves in the relation of
demand and supply and which, as such, influence “the
mind” of the operators on the market. This is a
very important discovery!

2) In connection with the conversion of
commodity values into cost-prices, “various
circumstances” are taken into account which as
“reasons for compensation” influence the mind or
are reflected in the mind. All these reasons for
compensation, however, affect only the mind of the
capitalist as capitalist and stem from the nature of
capitalist production itself, and not from the subjective
notions of buyers and sellers. In their mind they
exist rather as self-evident “eternal
truths”.

Like his predecessors, Bailey catches hold of Ricardo’s
confusion of values and cost-prices in order to prove that
value is not determined by labour, because cost-prices are
deviations from values. Although this is quite correct
in relation to Ricardo’s identification [of values with
cost-prices], it is incorrect as far as the question itself
is concerned.

In this context, Bailey quotes first from Ricardo himself
about the change in the relative values of ||837| commodities in consequence of
a rise in the value of labour. He quotes further the
“effect of time” (different times of production
though the labour-time remains unchanged), the same case
which aroused scruples in Mill.[aa] He does not notice the real
general contradiction—the very existence of
an average rate of profit, despite the different
composition of capital [in different industries], its
different times of circulation, etc. He simply repeats
the particular forms in which the contradiction appears, and
which Ricardo himself—and his followers—had
already noticed. Here he merely echoes what has
been previously said but does not advance criticism a step
forward.

He emphasises further that the costs of production are
the main cause of “value”, and therefore the
main element in value. However, he stresses
correctly—as was done [by other writers] after
Ricardo—that the concept of production costs
itself varies. He himself in the last analysis
expresses his agreement with Torrens that value is
determined by the capital advanced, which is correct in
relation to cost-prices but meaningless if it is not evolved
on the basis of value itself, that is, if the value of a
commodityis to be derived from a more developed relationship, the
value of capital, and not the other way round.

His last objection is this: The value of commodities
cannot be measured by labour-time if the labour-time in one
trade is not the same as in the others, so that the
commodity in which, for example, 12 hours of an engineer’s
labour is embodied has perhaps twice the value of the
commodity in which 12 hours of the labour of an agricultural
labourer is embodied. What this amounts to is the
following: A simple working-day, for example, is not a
measure of value if there are other working-days which,
compared with days of simple labour, have the effect of
composite working-days. Ricardo showed that this fact
does not prevent the measurement of commodities by
labour-time if the relation between unskilled and skilled
labour is given. He has indeed not described how this
relation develops and is determined. This belongs to
the definition of wages, and, in the last analysis,
can be reduced to the different values of labour power
itself, that is, its varying production costs
(determined by labour-time).

The passages in which Bailey expresses what has been
summarised above are:

“It is not, indeed, disputed, that
the main circumstance, which determines the quantities
in which articles of this class” (that is, where
no monopoly exists and where it is possible to increase
output by expanding industry)

“are exchanged, is the cost of
production; but our best economists do not exactly agree
on the meaning to be attached to this term; some contending
that the quantity of labour expended on the
production of an article constitutes its cost; others, that
the capital employed upon it is entitled to that
appellation” (op. cit., p. 200).

“What the labourer produces without
capital, costs him his labour; what the capitalist produces
costs him his capital” (p. 201).

(This is the factor which determines Torrens’s
views. The labour which the capitalist employs, costs
him nothing apart from the capital he lays out in
wages.)

“ … the mass of commodities
are determined in value by the capital expended upon
them” (p. 206).

[Bailey raises the following objections] to the
determination of the value of commodities simply by the
quantity of labour contained in them:

“Now this cannot be true if we can
find any instances of the following nature: 1) Cases in
which two commodities have been produced by an equal
quantity of labour, and yet sell for different quantities of
money. 2) Cases in which two commodities, once equal
in value, have become unequal in
value, without any change in the quantity of labour
respectively employed in each” (p. 209).

“It is no answer” (with regard
to cases of the first kind) “to say, with Mr. Ricardo,
that ‘the estimation in which different qualities of
labour are held, comes soon to be adjusted in the market
with sufficient precision for all practical purposes’;
or with Mr. Mill, that ‘in estimating equal quantities
of labour, an allowance would, of course, be included for
different degrees of hardness and skill’.
Instances of this kind entirely destroy the integrity of the
rule” (p. 210).

“There are only two possible methods
of comparing one quantity of labour with another; one is to
compare them by the time expended, the other by
the results produced” (the latter is done in the
piece-rate system). “The former is applicable to
all kinds of labour; the latter can be used only in
comparing labour bestowed on similar articles. If
therefore, in estimating two different sorts of work, the
time spent will not determine the proportion between the
||839| quantities of labour, it
must remain undetermined and undeterminable”
(p. 215).

With reference to 2: “Take any two commodities of
equal value, A and B, one produced by fixed capital and the
other by labour, without the intervention of machinery; and
suppose, that without any change whatever in the fixed
capital or the quantity of labour, there should happen to be
a rise in the value of labour; according to Mr. Ricardo’s
own showing, A and B would be instantly altered in their
relation to each other; that is, they would become unequal
in value” (pp. 215-16).

“To these cases we may add the
effect of time on value. If a commodity take
more time than another for its production, although no
more capital and labour, its value will be
greater. The influence of this cause is admitted by
Mr. Ricardo, but Mr. Mill contends…” and so on
(loc. cit. [p. 217]).

Finally Mr. Bailey remarks, and this is the only new
contribution he makes in this respect:

“… although we have arranged
commodities under three divisions,”[bb] <this, i.e., the three
divisions, is again taken from the author of the Verbal
Observations> (these three divisions depend on the
existence of absolute monopoly, limited monopoly, as is the
case with corn, or completely free competition) “yet
they are all, not only promiscuously exchanged for each
other, but blended in production. A commodity,
therefore, may owe part of its value to monopoly, and part
to those causes which determine the value of unmonopolised
products. An article, for instance, may be
manufactured amidst the freest competition out of a raw
material, which a complete monopoly enables its producer to
sell at six times the actual cost” (p. 223).

“In this case it is obvious, that
although the value of the article might be correctly said to
be determined by the quantity of capital expended upon it by
the manufacturer, yet no analysis could possibly resolve the
value of the capital into quantity of labour”
(pp. 223-24).

This remark is correct. But monopoly does not
concern us here, where we are dealing with two things only,
value and
cost-price. It is clear that the conversion
of value into cost-price works in two ways. First, the
profit which is added to the capital advanced may be either
above or below the surplus-value which is contained
in the commodity itself, that is, it may represent more or
less unpaid labour than the commodity itself
contains. This applies to the variable part of capital
and its reproduction in the commodity. But apart from
this, the cost-price of constant capital—or of the
commodities which enter into the value of the newly produced
commodity as raw materials, auxiliary materials and
machinery [or] labour conditions—may likewise be
either above or below its value. Thus the commodity
comprises a portion of the price which differs from value,
and this portion is independent of the quantity of labour
newly added, or of the labour whereby these conditions of
production with given cost-prices are transformed into a new
product. It is clear that what applies to the
difference between the cost-price and the value of the
commodity as such—as a result of the production
process—likewise applies to the commodity
insofar as, in the form of constant capital, it becomes an
ingredient, a pre-condition, of the production
process. Variable capital, whatever difference between
value and cost-price it may contain, is replaced by a
certain quantity of labour which forms a constituent part of
the value of the new commodity, irrespective of whether its
price expresses its value correctly or stands above or below
the value. On the other hand, the difference between
cost-price and value, insofar as it enters into the price of
the new commodity independently of its own production
process, is incorporated into the value of the new commodity
as an antecedent element.

The difference between the cost-price and the value of
the commodity is thus brought about in two ways: by the
difference between the cost-price and the values of
commodities which constitute the pre-conditions of the
process of production of the new commodity; by the
difference between the surplus-value which is really added
to the conditions of production and the profit which is
calculated [on the capital advanced]. But every
commodity which enters into another commodity as constant
capital, itself emerges as the result, the product, of
another production process. And so the commodity
appears alternately as a pre-condition for the production of
other commodities and as the result of a process in which
the existence of other commodities is the pre-condition for
its own production. In agriculture
(cattle-breeding), the same commodity appears at one
point of time as a product and at another as a condition of
production.

This important deviation of cost-prices from values
brought about by capitalist production does not alter the
fact that cost-prices continue to be determined by
values.

4. McCulloch

[a) Vulgarisation and Complete Decline of the Ricardian
System under the Guise of Its Logical Completion.
Cynical Apologia for Capitalist Production.
Unprincipled Eclecticism]

||840| McCulloch, the
vulgariser of Ricardian political economy and simultaneously
the most pitiful embodiment of its decline.

He vulgarises not only Ricardo but also James Mill.

He is moreover a vulgar economist in everything and an
apologist for the existing state of affairs. His only
fear, driven to ridiculous extremes, is the tendency of
profit to fall; he is perfectly contented with the position
of the workers, and in general, with all the contradictions
of bourgeois economy which weigh heavily upon the working
class. Here everything is green. He even knows
that

“the introduction of machines into
any employment necessarily occasions an equal or greater
demand for the disengaged labourers in some other
employment” [J. R. McCulloch, The Principles of
Political Economy, Edinburgh, 1825, pp. 181-82; quoted
by Cazenove in Outlines of Political Economy, London,
1832, pp. 119-20].

In this question he deviates from Ricardo, and in his
later writings, he also becomes very mealy-mouthed about the
landowners. But his whole tender anxiety is reserved
for the poor capitalists, in view of the tendency of the
rate of profit to fall.

Mr. McCulloch, unlike other exponents of science, seems
to look not for characteristic differences, but only
“for resemblances; and proceeding upon this
principle, he is led to confound material with immaterial
objects; productive with unproductive labour; capital with
revenue; the food of the labourer with the labourer himself;
production with consumption; and labour with
profits”[cc]
(T. R. Malthus, Definitions in Political Economy,
London, 1827, pp. 69-70).

“Mr. McCulloch,
in his Principles of Political Economy, divides
value into real and exchangeable;[dd] the
former, he says, (page 225)[ee] is dependent on the quantity of
labour required for the production of any commodity,[ff] and the latter on
the quantity of labour, or of any other commodity,
for which it will exchange; and these two values are,
he says, (page 215), identical, in the ordinary state
of things, that is, when the supply of commodities in the
market is exactly proportioned to the effectual demand for
them. Now, if they be identical, the two quantities of
labour which he refers to must be identical also; but, at
page 221, he tells us that they are not, for that the one
includes profits, while the other excludes them” (
[John Cazenove,] Out- lines of Political Economy,
London, 1832, p. 25).

McCulloch says [in a note] on page 221 of his
Principles of Political Economy:

“In point of fact, it” (the
commodity) “will always exchange for
more”<labour than has been required for its
production> “and it is this excess that
constitutes profits.”

This is a brilliant example of the methods used by this
arch-humbug of a Scotsman.

The arguments of Malthus, Bailey, etc., compel him to
differentiate between real value and
exchangeable or relative value. But he
does so, basically, in the way he finds the difference dealt
with by Ricardo. Real value means the commodity
examined with regard to the labour required for its
production; relative value implies the consideration
of the proportions of different commodities which can
be produced in the same amount of time, which are
consequently equivalents, and the value of one of
which can therefore be expressed in the quantity of
use-value of the other which costs the same amount of
labour-time. The relative value of commodities,
in this Ricardian sense, is only another expression for
their real value and means nothing more than that the
commodities exchange with one another in proportion to the
labour-time embodied in them, in other words, that the
labour-time embodied in both is equal. If,
therefore, the market price of a commodity is equal to its
exchange-value (as is the case when supply and demand are in
equilibrium), then the commodity bought contains as much
labour as that
which is sold. It merely realises its
exchange-value, or it is only sold at its
exchange-value when one receives the same amount
of labour in exchange for it as one hands over.

McCulloch relates all this, correctly repeating what has
already been said. But he goes too far here since the
Malthusian definition of exchange-value—the quantity
of wage-labour which a commodity commands—already
sticks in his throat. He therefore defines relative
value as the “quantity of labour, or of any
other commodity, for which it” (a commodity)
“will exchange”. Ricardo, in dealing with
relative value, always speaks only of commodities and does
not include labour, since in the exchange of commodities a
profit is only realised because in the exchange between
commodity and labour unequal quantities of labour are
exchanged. By putting the main emphasis right at the
beginning of his book on the fact that the determination of
the value ||841| of a commodity
by the labour-time embodied in it differs immensely from the
determination of this value by the quantity of labour which
it can buy, Ricardo, on the one hand, establishes the
difference between the quantity of labour contained in a
commodity and the quantity of labour which it
commands. On the other hand, he excludes the exchange
of commodity and labour from the relative value of a
commodity. For if a commodity is exchanged for a
commodity, equal quantities of labour are exchanged; but if
a commodity is exchanged for labour, unequal quantities of
labour are exchanged, and capitalist production rests on the
inequality of this exchange. Ricardo does not explain
how this exception fits in with the concept of
value. This is the reason for the arguments amongst
his followers. But his instinct is sound when he makes
the exception. (In actual fact, there is no
exception; it exists only in his formulation.)
Thus McCulloch goes farther than Ricardo and is apparently
more consistent than he.

There is no flaw in his system; it is all of a
piece. Whether a commodity is exchanged for a
commodity or for labour, this ratio of exchange is the
relative value of the commodity. And if the
commodities exchanged are sold at their value (i.e., if
demand and supply coincide), this relative value is always
the expression of the real value. That is,
there are equal quantities of labour at both poles of the
exchange. Thus “in the ordinary state of
things” a commodity only exchanges for a quantity of
wage-labour equal to the quantity of labour contained in
it. The workman receives in wages just as much
materialised labour
as he gives back to capital in the form of immediate
labour. With this the source of surplus-value
disappears and the whole Ricardian theory collapses.

Thus Mr. McCulloch first destroys it under the appearance
of making it more consistent.

And what next? He then flits shamelessly from
Ricardo to Malthus, according to whom the value of a
commodity is determined by the quantity of labour which it
buys and which must always be greater than that which the
commodity itself contains. The only difference is that
in Malthus this is plainly stated to be what it is,
opposition to Ricardo, and Mr. McCulloch adopts
this opposite viewpoint after he has adopted the Ricardian
formula with an apparent consistency (that is, with the
consistency of incogitancy) which destroys the whole sense
of the Ricardian theory. McCulloch therefore does not
understand the essential kernel of Ricardo’s
teaching—how profit is realised because commodities
exchange at their value—and abandons it.
Since exchangeable value—which “in the ordinary
state of […] the market” is, according to
McCulloch, equal to the real value but “in point of
fact” is always greater, since profit is based on
this surplus (a fine contradiction and a fine discourse
based on a “point of fact”)—is “the
quantity of labour, or of any other commodity”, for
which the commodity is exchanged, hence what applies to
“labour” applies to “any other
commodity”. This means that the commodity is not
only exchanged for a greater amount of immediate labour than
it itself contains, but for more materialised labour in the
other commodities than it itself contains; in other words,
profit is “profit upon expropriation” and with
this we are back again amongst the Mercantilists.
Malthus draws this conclusion. With McCulloch this
conclusion follows naturally but with the pretence that this
constitutes an elaboration of the Ricardian system.

And this total decline of the Ricardian system into
twaddle—a decline which prides itself on being its
most consistent exposition—has been accepted by the
mob, especially by the mob on the Continent (with Herr
Roscher naturally amongst them), as the conclusion of the
Ricardian system carried too far, to its extreme
limit; they thus believe Mr. McCulloch that the Ricardian
mode of “coughing and spitting”, which he uses
to conceal his helpless, thoughtless and unprincipled
eclecticism, is in fact a scientific attempt to set forth
Ricardo’s system consistently.

McCulloch is simply a man who wanted to turn
Ricardian
economics to his own advantage—an aim in
which he succeeded in a most remarkable degree. In the
same way Say used Smith, but Say at least made a
contribution by bringing Smith’s theories into a certain
formal order and, apart from misconceptions, he occasionally
also ventured to advance theoretical objections. Since
McCulloch first obtained a professorial chair in London on
account of Ricardian economics, in the beginning he had to
come forward as a Ricardian and especially to participate in
the struggle against the landlords. As soon as he had
obtained a foothold and climbed to a position on Ricardo’s
shoulders, ||842| his main
effort was directed to expounding political economy,
especially Ricardian economics, within the framework of
Whiggism and to eliminate all conclusions which were
distasteful to the Whigs. His last works on money,
taxes, etc., are mere pleas on behalf of the Whig Cabinet of
the day. In this way the man secured lucrative
jobs. His statistical writings are merely catch-penny
efforts. The incogitant decline and vulgarisation of
the theory likewise reveal the fellow himself as a
vulgarian, a matter to which we shall have to return before
we have done with that speculating Scotsman.

In 1828 McCulloch published Smith’s Wealth of
Nations, and the fourth volume of this edition contains
his own “notes” and “dissertations”
in which, to pad out the volume, he reprints in part some
mediocre essays which he had published previously, e.g., on
“entail”, and which have absolutely nothing to
do with the matter, and in part, his lectures on the history
of political economy repeated almost verbatim; he himself
says that he “largely draws upon them”; in part,
however, he tries in his own way to assimilate the new ideas
advanced in the interim by Mill and by Ricardo’s
opponents.

In his Principles of Political Economy,
Mr. McCulloch presents us with nothing more than a copy of
his “notes” and “dissertations”
which he had already copied from his earlier
“scattered manuscripts”. But things turned
out slightly worse in the Principles, for
inconsistencies are of less importance in notes than in an
allegedly methodical treatment. Thus the passages
quoted above, though they are, in part, taken verbatim from
the “notes”, look rather less inconsistent in
these “notes” than they do in the
Principles. <In addition the
Principles contain plagiarisms of Mill amplified by
absurd illustrations, and reprints of articles on corn
trade, etc., which he has repeatedly published, maybe
verbatim, under twenty different
titles in different periodicals, often even in the
same periodical at different periods.>

In the above-mentioned Volume IV of his edition of
Adam Smith (London, 1828), Mac says (he repeats the same
thing word for word in his Principles of Political
Economy but without making the distinctions which he
still felt to be necessary in the “notes”):

“… it is necessary to
distinguish between the exchangeable value, and the
real or cost value of commodities or
products. By the first, or the exchange able
value of a commodity or product, is meant its
power or capacity of exchanging either for other commodities
or for labour; and by the second, or its real
or cost value, is meant the quantity of labour which it
required for its production or appropriation, or rather the
quantity which would be required for the production or
appropriation of a similar commodity at the time when the
investigation is made” ([J. R. McCulloch in: Adam
Smith, An Inquiry into the Nature and Causes of the
Wealth of Nations, Vol. IV, London, 1828,] pp. 85-86
[Note II]).

“A commodity produced by a
certain quantity of labour will” <when the supply
of commodities is equal to the effectual demand>
“uniformly exchange for, or buy any other commodity
produced by the same quantity of labour. It will
never, however, exchange for, or buy exactly the same
quantity of labour that produced it; but though it will not
do this, it will always exchange for, or buy the same
quantity of labour as any other commodity produced under the
same circumstances, or by means of the same quantity of
labour, as itself” (op. cit., pp. 96-97).

“In point of fact” (this
phrase is repeated literally in the Principles,
since, in point of fact, this “in point of fact”
constitutes the whole of his deduction), “it”
(the commodity) “will always exchange for more”
(viz., for more labour than that by which it was produced)
“and it is this excess that constitutes
profits. No capitalist could have any
motive” (as if the “motive” of the
buyer was the point in question when dealing with the
exchange of commodities and the investigation of their
value) “to exchange the produce of a given quantity of
labour already performed ||843|
for the produce of the same quantity of labour to be
performed. This would be to lend”
(“to exchange” would be “to lend”)
“without receiving any interest on the loan”
(loc. cit., p. 96 [note to Note II]).

Let us start at the end.

If the capitalist did not get back more labour than the
amount he advances in wages, he would “lend”
without receiving a “profit”. What has to
be explained is how profit is possible if commodities
(labour or other commodities) are exchanged at their
value. And the answer is that no profit would be
possible if equivalents were exchanged. It is assumed,
first of all, that capitalist and worker
“exchange”. And then, in order to explain
profit, it is assumed that they do “not”
exchange, but that one of the parties lends (i.e., gives
commodities) and the other borrows, that is, pays only after
he has received the commodities.
In other words, in order to explain profit, it is said
that the capitalist secures “no interest” if he
makes no profit. This is [putting] the thing
wrongly. The commodities in which the capitalist pays
wages and the commodities which he gets back as a result of
the labour, are different use-values. He does
not therefore receive back what he advanced, any more than
he does when he exchanges one commodity for another.
Whether he buys another commodity, or whether he buys the
specific [commodity] labour which produces the other
commodity for him, amounts to the same. For the
use-value he advances he receives back another use-value, as
happens in all exchanges of commodities. If, on the
other hand, one pays attention only to the value of the
commodity, then it is no longer a contradiction to exchange
“a given quantity of labour already performed”
for “the same quantity of labour to be
performed” (although the capitalist in fact pays only
after the labour has been performed), nor is it a
contradiction to exchange a quantity of labour performed for
the same quantity of labour performed. This latter is
an insipid tautology. The first part of the passage
implies that “the labour to be performed” will
be embodied in a use-value different from that in which the
labour performed is embodied. In this case there is
thus a difference [between the objects to be exchanged] and,
consequently, a motive for exchange arising out of the
relationship itself, but this is not so in the other case,
since A only exchanges for A insofar as in this exchange it
is a matter of the quantity of labour. This is why
Mr. Mac has recourse to the motive. The motive
of the capitalist is to receive back a greater
“quantity of labour” than he advances.
Profit is here explained by the fact that the capitalist has
the motive to make “profit”. But
the same thing can be said about the sale of goods by the
merchant and about every sale of commodities not for
consumption but for gain. The seller has no motive to
exchange a quantity of performed labour for the same
quantity of performed labour. His motive is to get in
return more performed labour than he gives away. Hence
he must get more performed labour in the form of
money or commodities than he gives away in the form of a
commodity or of money. He must, therefore, buy cheaper
than he sells, and sell dearer than he has bought.
Profit upon alienation is thus explained, not by the
fact that it corresponds to the law of value, but by
declaring that buyers and sellers have no
“motive” for buying and selling in accordance
with the law of value. This is Mac’s
first “sublime” discovery, it fits
beautifully into the Ricardian system, which seeks to show
how the law of value asserts itself despite the
“motives” of seller and buyer.

||844| For the rest, Mac’s
presentation in the “notes” differs from the one
in the Principles only in the following:

In the Principles he makes a distinction between
“real value” and “relative value”
and says that both are equal “under ordinary
circumstances” but “in point of fact” they
cannot be equal if there is to be a profit. He
therefore says merely that the “fact”
contradicts the “principle”.

In the “notes” he distinguishes three sorts
of value: “real value”, the “relative
value” of a commodity in its exchange with other
commodities, and the relative value of a commodity exchanged
with labour. The “relative value” of a
commodity in its exchange with another commodity is its
real value expressed in another commodity, or
in an “equivalent”. On the other hand, its
relative value in exchange with labour is its real value
expressed in another real value that is greater than
itself. That means, its value is the exchange with a
greater value, with a non-equivalent. If it were
exchanged for an equivalent in labour, then there would be
no profit. The value of a commodity in its exchange
with labour is a greater value.

Problem: The Ricardian definition of value
conflicts with the exchange of commodities with labour.

Mac’s solution: In the exchange of a commodity
with labour the law of value does not exist, but its
contrary. Otherwise profit could not be
explained. Profit for him, the Ricardian, is to be
explained by the law of value.

Solution: The law of value (in this case) is
profit. “In point of fact” Mac only
reiterates what the opponents of the Ricardian theory say,
namely, that there would be no profit if the law of
value applied to exchange between capital and labour.
Consequently, they say, the Ricardian theory of value is
invalid. He [McCulloch] says that in this
case, which he must explain by the Ricardian law, the
law does not exist and that in this case “value”
“means” something else.

From this it is obvious how little he understands of the
Ricardian law. Otherwise he would have had to say that
profit arising in exchange between commodities which are
exchanged in proportion to the labour-time [embodied in
them], is due to the fact that “unpaid” labour
is contained in the commodities. In other words, the
unequal exchange between capital and
labour explains the exchange of commodities at their
value and the profit which is realised in the course of this
exchange. Instead of this he says: Commodities which
contain the same amount of labour-time command the same
amount of surplus labour, which is not contained in
them. He believes that in this way he has reconciled
Ricardo’s propositions with those of Malthus, by
establishing an identity between the determination of the
value of commodities by labour-time and the determination of
the value of commodities by their command over labour.
But what does it mean when he says that commodities which
contain the same amount of labour-time command the same
amount of surplus labour in addition to the labour
contained in them? It means nothing more than that a
commodity in which a definite amount of labour-time
is embodied commands a definite quantity of surplus labour
[that is, more labour] than it itself contains. That
this applies not only to commodity A, in which x
hours of labour-time are embodied, but also to commodity B,
in which x hours of labour-time are likewise
embodied, follows by definition from the Malthusian formula
itself.

The contradiction is therefore solved by Mac in this way:
If the Ricardian theory of value were really a valid one,
then profit, and consequently capital and capitalist
production, would be impossible. This is exactly what
Ricardo’s opponents assert. And this is what Mac
answers them, how he refutes them. And in so doing, he
does not notice the beauty of an explanation of exchangeable
value in [exchange with] labour which amounts to saying that
value is exchange for something which has no
value.

[b) Distortion of the Concept of Labour Through Its
Extension to Processes of Nature. Confusion of
Exchange-Value and Use-Value]

||845| After Mr. Mac has
thus abandoned the basis of Ricardian political economy, he
proceeds even further and destroys the basis of this
basis.

The first difficulty in the Ricardian system was [to
present] the exchange of capital and labour so that it
corresponded to the “law of value”.

The second difficulty was that capitals of equal
magnitude, no matter what their organic composition,
yield equal profits or the general rate of
profit. This is indeed the unrecognised problem of
how values are converted into cost-prices.

The difficulty arose because capitals of equal
magnitude, but of unequal composition—it is
immaterial whether the unequal composition is due to the
capitals containing unequal proportions of constant and
variable capital, or of fixed and circulating capital, or to
the unequal period of circulation of the capitals—set
in motion unequal quantities of immediate labour, and
therefore unequal quantities of unpaid labour; consequently
they cannot appropriate equal quantities of surplus-value or
surplus product in the process of production. Hence
they cannot yield equal profit if profit is nothing but the
surplus-value calculated on the value of the whole capital
advanced. If, how-ever, the surplus-value were
something different from (unpaid) labour, then labour could
after all not be the “foundation and measure” of
the value of commodities.

The difficulties arising in this context were discovered
by Ricardo himself (although not in their general form) and
set forth by him as exceptions to the law of
value. Malthus used these exceptions to throw the
whole law overboard on the grounds that the exceptions
constituted the rule. Torrens, who also criticised
Ricardo, indicated the problem at any rate when he said that
capitals of equal size set unequal quantities of labour
in motion, and nevertheless produce commodities of equal
“values”, hence value cannot be determined by
labour. Ditto Bailey, etc. Mill for
his part accepted the exceptions noted by Ricardo as
exceptions, and he had no scruples about them except with
regard to one single form. One particular cause of
the equalisation of the profits of the capitalists he
found incompatible with the law. It was the
following. Certain commodities remain in the process
of production (for example, wine in the cellar) without any
labour being applied to them; there is a period during which
they are subject to certain natural processes (for example,
prolonged breaks in labour occur in agriculture and in
tanning before certain new chemicals are applied—these
cases are not mentioned by Mill). These periods are
nevertheless considered as profit-yielding. The period
of time during which the commodity is not being worked on by
labour [is regarded] as labour-time (the same thing in
general applies where a longer period of circulation time
is involved). Mill “lied” his way—so
to speak—out of the difficulty by saying that one can
consider the time in which the wine, for example, is in
the cellar as a period when it is soaking up labour,
although according to the assumption this is, in
point of fact, not the case. Otherwise one
would have to say that “time” creates profit
and [according to Mill] time as such is “sound and
fury”. McCulloch uses this balderdash of Mill as
a starting-point, or rather he reproduces it in his
customary affected, plagiarist manner in a general form in
which the latent nonsense becomes apparent and the last
vestiges of the Ricardian system, as of all economic
thinking whatsoever, are happily discarded.

On closer consideration, all the difficulties mentioned
above resolve themselves into the following difficulty.

That part of capital which enters into the production
process in the form of commodities, i.e., as raw materials
or tools, does not add more value to the product than it
possessed before production. For it only has value
insofar as it is embodied labour and the labour contained in
it is in no way altered by its entry into the production
process. It is to such an extent independent of the
production process into which it enters and dependent on the
socially determined labour required for its own production
that its own value changes when more labour or less labour
than it itself contains is required for its
reproduction. As value, this part of capital therefore
enters unchanged into the production process and emerges
from it unchanged. Insofar as it really enters into
the production process and is changed, this change affects
only its use-value, i.e., it undergoes a change as
use-value. And all operations undergone by the
raw material or carried out by the instrument of labour are
merely processes to which they are submitted as specific
kinds of raw material, etc., and particular tools (spindles,
etc.), processes which affect their use-value, but which, as
processes, have nothing to do with their
exchange-value. Exchange-value is maintained in this
||846| change. That is
all.

It is different with that part of capital which is
exchanged against labour-power. The use-value of
labour-power is labour, the element which produces
exchange-value. Since the labour provided by
labour-power in industrial consumption is greater than the
labour which is required for the reproduction of the
labour-power, i.e., it provides more than an equivalent of
the wages the worker receives, the value which the
capitalist receives from the worker in exchange is greater
than the price he pays for this labour. It follows
from this that, if equal rates of exploitation are assumed,
of two capitals of equal size, that which sets less living
labour in motion—whether this is due to the fact that
the proportion of variable
capital is less from the start, or to the fact that it
has a [longer] period of circulation or period of production
during which it is not exchanged against labour, does not
come into contact with it, does not absorb it—will
produce less surplus-value, and, in general, commodities of
less value. How then can the values created be
equal and the surplus-values proportional to the
capital advanced? Ricardo was unable to answer this
question because, put in this way, it is absurd
since, in fact, neither equal values nor [equal]
surplus-values are produced. Ricardo, however, did not
understand the genesis of the general rate of profit nor,
consequently, the transformation of values into cost-prices
which differ specifically from them.

Mac, however, eliminates the difficulty by basing himself
on Mill’s insipid “evasion”. One gets
round the inconvenience by talking out of existence by means
of a phrase the characteristic difference out of which it
arose. This is the characteristic difference: The
use-value of labour-power is labour; it consequently
produces exchange-value. The use-value of the other
commodities is use-value as distinct from exchange-value,
therefore no change which this use-value undergoes can
change the predetermined exchange-value. McCulloch
gets round the difficulty by calling the use-values of
commodities—exchange-value, and the operations in
which they are involved as use-values, the services they
render as use-values in production—labour. For after all, in ordinary life we
speak of labouring animals, working machines, and even say
poetically that the iron works in the furnace, or works
under the blows of the hammer. It even screams.
And nothing is easier than to prove that every
“operation” is labour, for labour is—an
operation. In the same way one can prove that
everything material experiences sensation, for everything
which experiences sensation is—material.

“… labour may
properly be defined to be any sort of action or
operation, whether performed by man, the lower animals,
machinery, or natural agents, that tends to bring about
any[gg] desirable
result” (op. cit., p. 75, Note I).

And this does not by any means apply [solely] to
instruments of labour. It is in the nature of things
that this applies equally to raw materials. Wool
undergoes a physical action or operation when it is
dyed. In general, nothing can be acted upon
physically, mechanically, chemically, etc., in order
“to bring about
any desirable result” without the thing itself
reacting. It cannot therefore be worked upon without
itself working. Thus all commodities which enter into
the production process bring about an increase in value not
only by retaining their own value, but by creating new
value, because they “work” and are not merely
materialised labour. In this way, all the difficulties
are naturally eliminated. In reality, this is merely a
paraphrase, a new name for Say’s “productive services
of capital”, “productive services of
land”, etc., which Ricardo attacked continuously and
against which Mac—strange to say—himself
polemises in the same “dissertation” or
“note” where he pompously presents his
discovery, borrowed from Mill and embellished still
further. In criticising Say, McCulloch makes lavish
use of recollected passages from Ricardo and remembers that
these “productive services” are in fact only
the attributes displayed by things as use-values in
the production process. But naturally, all this is
changed when he calls these “productive
services” by the sacramental name of
“labour”.

||847|After Mac has
happily transformed commodities into workers, it goes
without saying that these workers also draw wages and that,
in addition to the value they possess as “accumulated
labour”, they must be paid wages for their
“operations” or “action”.
These wages of the commodities are pocketed by the
capitalists per procurationem; they are
“wages of accumulated labour”—alias
profit. And this [according to McCulloch] is proof
that equal profit on equal capitals, whether they set large
or small amounts of labour in motion, follows directly from
the determination of value by labour-time.

The most extraordinary thing about all this, as we have
already noted, is the way Mac, at the very moment when he is
basing himself on Mill and appropriating Say, hurls
Ricardian phrases against Say. How literally he copies
Say—except that where Say speaks of action, he
[McCulloch] calls this action labour—can best
be seen from the following passages from Ricardo where the
latter is criticising Say.

“M. Say … imputes to
him” (Adam Smith) “as an error, that ‘he
attributes to the labour of man alone, the power of
producing value. A more correct analysis shows us that
value is owing to the action of labour, or rather the
industry of man, combined with the action of those
agents which nature supplies, and with that of
capital. His ignorance of this principle prevented
him from establishing the true theory of the influence of
machinery in the production of riches.’ In
contradiction to the opinion of Adam Smith, M. Say …
speaks of the value which is given to commodities by
natural
agents… But those natural agents, though
they add greatly to value in use, never add
exchangeable value, of which M. Say is
speaking…” (David Ricardo, Principles of
Political Economy, and Taxation, third ed., London,
1821, pp. 334-36).

“… machines and natural
agents might very greatly add to the riches of a
country,” but they do “not … add any
thing to the value of those riches” (loc. cit., p. 335
[note]).

Like all economists worth naming, [including] Adam Smith
(although in a fit of humour he once called the ox a
productive labourer), Ricardo emphasises that labour as
human activity, even more, as socially determined
human activity, is the sole source of value. It
is precisely through the consistency with which he treats
the value of commodities as merely
“representing” socially determined labour, that
Ricardo differs from the other economists. All these
economists understand more or less clearly, but Ricardo more
clearly than the others, that the exchange-value of
things is a mere expression, a specific social form,
of the productive activity of men, something entirely
different from things and their use as things, whether in
industrial or in non-industrial consumption. For them,
value is, in fact, simply an objectively expressed relation
of the productive activity of men, of the different types of
labour to one another. When he argues against Say,
Ricardo explicitly quotes the words of Destutt de Tracy, as
expressing his own views.

“As it is certain that our physical
and moral faculties are alone our original riches, the
employment of those faculties” (the faculties
of men), “labour of some kind” (that is,
labour as the realisation of the faculties of men),
“is our only original treasure, and that it is always
from this employment, that all those things are created
which we call riches… It is certain too, that
all those things only
represent the labour which has created them, and if they
have a value, or even two distinct values, they can
only derive them from that of the labour from which they
emanate” ( [Destutt do Tracy, Elémens
d’idéologie, IV-e et V-e parties.
“Traité de la volonté et de ses
effets”, Paris, 1826, pp. 35-36; quoted by Ricardo in
his Principles of Political Economy, and Taxation,
third ed., London, 1821,] p. 334).

Thus commodities, things in general, have value only
because they represent human ||848| labour, not insofar as they
are things in themselves, but insofar as they are
incarnations of social labour.

And yet some persons have had the temerity to say that
the miserable Mac has taken Ricardo to extremes, he who, in
his incogitant efforts to “utilise” the
Ricardian theory eclectically along with those opposed to
it, identifies its basic principle and that of
all political economy—labour itself as human
activity
and as socially determined human activity—with the
physical action, etc., which commodities possess as
use-values, as things. He who abandons the very
concept of labour itself!

Rendered insolent by Mill’s “evasion”, he
plagiarises Say while arguing against him with Ricardian
phrases and copies precisely those phrases of Say which
Ricardo in Chapter 20 of his book, entitled “Value and
Riches”, attacks as being fundamentally opposed to his
own ideas and those of Smith. (Roscher naturally
repeats that Mac has carried Ricardo to extremes.)
Mac, however, is sillier than Say, who does not call the
“action” of fire, machinery, etc.,
labour. And more inconsistent.

While Say attributes the creation of “value”
to wind, fire, etc., Mac considers that only those
use-values, things, which can be monopolised create value,
as if it were possible to utilise the wind, or steam, or
water as motive power without the possession of windmills,
steam-driven machinery or water-wheels! As if those
who own, monopolise, the things, whose possession alone
enables them to employ the natural agents, did not also
monopolise the natural agents. I can have as much air,
water, etc., as I like. But I possess them as
productive agents only if I have the commodities, the
things, by the use of which these agents will operate as
such. Thus Mac is even lower than Say.

This vulgarisation of Ricardo represents the most
complete and most frivolous decline of Ricardo’s theory.

“In so far, however, as that
result” (i.e., the result produced by the action or
operation of any thing) “is effected by the labour
or operation of natural agents, that can neither be
monopolised nor appropriated by a greater or smaller number
of individuals to the exclusion of others, it has no
value. What is done by these agents is done
gratuitously” (J. R. McCulloch [in: Adam Smith,
An Inquiry into the Nature and Causes of the Wealth of
Nations, Vol. IV, London, 1828], p. 75 [Note I]).

As if what is done by cotton, wool, iron or machinery,
were not also done “gratuitously”. The
machine costs money, but the operation of the machine is not
paid for. No use-value of any kind of commodity costs
anything after its exchange-value has been paid.

“The man who sells oil makes no
charge for its natural qualities. In estimating its
cost he puts down the value of the labour employed in its
pursuit, and such is its value” (H. C. Carey,
Principles of Political Economy… Part I,
Philadelphia, 1837, p. 47).

In arguing against Say, Ricardo emphasises precisely that
the action of the machine, for
example, costs just as little as that of wind and water.

“… the services which …
natural agents andmachinery
perform for us … are serviceable to us … by
adding to value in use; but as they perform their
work gratuitously … the assistance which they
afford us, adds nothing to value in exchange”
(David Ricardo, [Principles of Political Economy, and
Taxation, third ed., London, 1821,] pp. 336-37).

Thus Mac has not understood the most elementary
propositions of Ricardo. But the sly dog thinks: if
the use-value of cotton, machinery, etc., costs
nothing, is not paid for apart from its
exchange-value, then, on the other hand, this use-value is
sold by those who use cotton, machinery, etc.
They sell what costs them nothing.

||849| The brutal
thoughtlessness of this fellow is evident, for after
accepting Say’s “principle”, he sets forth rent
with great emphasis, plagiarising extensively from
Ricardo.

Land is a

“natural agent” that can be
“monopolised or appropriated by a greater or smaller
number of individuals to the exclusion of others”
[J. R. McCulloch, loc. cit., p. 75, Note I],

and its natural, vegetative action or
“labour”, its productive power, consequently has
value, and rent is thus ascribed to the
“productive power” of land, as is done by the
Physiocrats. This is an outstanding example of Mac’s
way of vulgarising Ricardo. On the one hand, he copies
Ricardo’s arguments, which only make sense if they are based
on the Ricardian assumptions, and on the other hand, he
takes from others the direct negation of these assumptions
(with the reservation that he uses his
“nomenclature” or makes some small changes in
the propositions). He should have said: “Rent is
the wages of land” pocketed by the landowner.

“If a capitalist expends the same sum
in paying the wages of labourers, and maintaining horses, or
in hiring a machine, and if the men, the horses, and the
machine can all perform the same piece of work, its
value will obviously be the same by whichever of them
it may have been performed” (op. cit., p. 77 [Note
I]).

In other words: the value of the product depends on the
value of the capital laid out. This is the problem to
be solved. The formulation of the problem is,
according to Mac, “obviously” the
solution of it. But since the machine, for example,
performs a greater piece of work than the men displaced by
it, it is even
more “obvious” that the product of the
machine will not fall but rise in value compared with the
value of the product of the men who “perform the same
work”. Since the machine can produce 10,000
units of work where a man can only produce one, and every
unit has the same value, the product of the machine
should be 10,000 times as dear as that “of
man”.

Moreover, in his anxiety to distinguish himself from Say
by stating that value is produced not by the action
of natural agents but only by the action of monopolised
agents, or agents produced by labour, Mac gets into
difficulties and falls back on Ricardian phrases. For
example, the labour of the wind produces the desired
effect on the ship (produces a change in it).

“… but the value of
that change is not increased by, and is in no degree
dependent on, the operation or labour of the natural agents
concerned, but on the amount of capital, or the
produce of previous labour, that cooperated in the
production of the effect; just as the cost of
grinding corn does not depend on the action of the wind
or water that turns the mill, but on the amount of capital
wasted in the operation” (op. cit., p. 79 [Note
I]).

Here, all of a sudden, grinding is viewed as adding value
to the corn insofar only as capital—“the
produce of previous labour”—is
“wasted” in the act of grinding. That is,
it is not due to the millstone “working”, but to
the fact that along with the “waste” of the
millstone, the value contained in it, the labour embodied in
it, is also “wasted”.

After these pretty arguments, Mac sums up the wisdom
(borrowed from Mill and Say) in which he brings the concept
of value into harmony with all kinds of contradictory
phenomena, in the following way:

“… the word labour
means … in all discussions respecting value
… either the immediate labour of man, or the
labour of the capital produced by man, or both”
(op. cit., p. 84 [note to Note II]).

Hence labour ||850| is to be
understood as meaning the labour of man, then his
accumulated labour, and finally, the practical
application, that is, the physical, etc., properties of
use-values evolved in (industrial) consumption. Apart
from these properties, use-value means nothing at all.
Use-value operates only in consumption. Consequently,
by the exchange-value of the products of labour, we [are to]
understand the use-value of these products, for this
use-value consists only in its action, or, as Mac
calls it, “labour”, in consumption,
regardless of whether this is industrial consumption or
not. However, the types
of “operation”, “action”,
or “labour” of use-values, as well as their
physical measures, are as varied as the use-values
themselves. But what is the unity, the measure by
means of which we compare them? This is established by
the general word “labour” which is substituted
for these quite different applications of use-values, after
labour itself has been reduced to the words
“operation” or “action”.

Thus, with the identification of use-value and
exchange-value ends this vulgarisation of Ricardo, which we
must therefore consider as the last and most sordid
expression of the decline of the Ricardian school as
such.

“The profits of capital are
only another name for the wages of accumulated
labour” (J. R. McCulloch, The Principles of
Political Economy, London, 1825, p. 291),

that is, for the wages paid to commodities for the
services they render as use-values in production.

In addition, these wages of accumulated labour have their
own mysterious connotation as far as Mr. McCulloch is
concerned. We have already mentioned that, apart from
his plagiarism of Ricardo, Mill, Malthus and Say, which
constitutes the real basis of his writings, he himself
continually reprints and sells his “accumulated
labour” under various titles, always “largely
drawing” upon writings for which he has been paid
before. This method of drawing “the wages of
accumulated labour” was discussed at great length as
early as 1826 in a special work, and what has not
McCulloch done since then—from 1826 to 1862—with
regard to drawing wages for accumulated labour! (This
miserable phrase has also been adopted by Roscher in his
role of Thucydides.)

The book referred to is called: Some illustrations of
Mr. McCulloch’s Principles of Political Economy,
Edinburgh, 1826, by Mordecai Mullion. It traces how
our chevalier d’industrie made a name for
himself. Nine-tenths of his work is copied from Adam
Smith, Ricardo and others, the remaining tenth being culled
repeatedly from his own accumulated labour which he repeats
most shamelessly and contemptibly. Mullion shows, for
example, not only that McCulloch sold the same
articles to The Edinburgh Review and The
Scotsman and the Encyclopaedia Britannica as his
own “dissertations” and as new works, but also
that he published the same articles word for
word and with only a few transpositions and under new
titles in different issues of The Edinburgh Review
over the years.

In this respect Mullion says the following about
“this most incredible cobbler”, “this most
Economical of all Economists”:

“Mr. McCulloch’s articles are as
unlike as may be to the heavenly bodies […] but, in
one respect, they resemble such luminaries—they have
stated times of return” ([Mordecai Mullion,]
(op. cit., p. 21).

No wonder he believes in “the wages of accumulated
labour.”

Mr. McCulloch’s fame illustrates the power of fraudulent
baseness.

||850a| In order to perceive
how McCulloch exploits some of Ricardo’s propositions to
give himself airs, see, inter alia, The Edinburgh
Review for March 1824, where this friend of the wages of
accumulated labour gives vent to a veritable jeremiad about
the fall in the rate of profit. (This claptrap is
called “Considerations on the Accumulation of
Capital”.)

“The author … expresses the
fears in him by the decline in profit as
follows:”

‘…the condition
of’ (England) ‘however prosperous in appearance,
is had and unsound at bottom; […] the plague of
poverty is secretly creeping on the mass of her citizens;
[…] the foundations of her power and greatness have
been shaken… ’

‘… where […] the rate
of interest is low, as in [Holland and] England, […]
the profits of stock are also low […], those are
countries […] that […] are approaching the
termination of their career.’

There was no need for Mr. Mac to distress himself over
the fact that “land” gets better
“wages” than “iron, bricks, etc.”
The cause must be that it “labours”
harder. |XIV-850a||

***

||XV-925| <Even a blind
sow sometimes finds an acorn and so does McCulloch in the
following passages. But even this, as he presents it,
is only an inconsistency, since he does not distinguish
surplus-value from profit. Secondly, it is again one
of his thoughtless, eclectic acts of plagiarism.
According to fellows like Torrens, for whom value is
determined by capital—and the same applies to
Bailey—profit is proportionate to the capital
advanced. Unlike Ricardo, they do not consider that
profit and surplus-value are identical concepts, but
only
because they have no need whatsoever to explain profit on
the basis of value, since they regard the visible form of
surplus-value—profit as the relation of surplus-value
to the capital advanced—as the original form and, in
fact, they merely trans-late the apparent form into
words.

The passages in Mac’s work, who is (1) a Ricardian and
(2) plagiarises Ricardo’s opponents—without attempting
to reconcile [the conflicting ideas]—read:

Ricardo’s law [that a rise in profits can be brought
about in no other way than by a fall in wages, and a fall in
profits only by a rise in wages] is only true “in
those cases in which the productiveness of industry
[…] remains constant”[ii] (J. R. McCulloch,
The Principles of Political Economy, London, 1825,
p. 373), that is, the productiveness of the industry which
produces constant capital.

“… profits depend on the
proportion which they bear to the capital by which they are
produced, and not on the proportion […] to
wages”[jj]
(loc.cit., pp. 373-74). If the productivity of
industry in general is doubled and the additional
product thus obtained is divided between capitalists and
workers, then the proportion of the share of the capitalists
to that of the workers remains unchanged, although the
rate of profit calculated on the capital advanced has
risen.[kk]

Even in this case, as Mac also notes, one can say that
wages have fallen relatively as compared with the
product, because profits have risen. (But in
this case it is the rise in profits which Is the cause of
the fall in wages.) This calculation, however, rests
on the incorrect method of calculating wages as a share in
the product, and, as we saw previously, Mr. John Stuart
Mill seeks to generalise the Ricardian law in this
sophistical manner.> |XV-925||

||XIV-850a| Wakefield’s real
contribution to the understanding of capital has already
been dealt with in the previous section on the Conversion
of Surplus-Value into Capital. Here we shall only
deal with what is directly relevant to the
“topic”.

“Treating labour as a commodity, and
capital, the produce of labour, as another, then, if the
value of these two commodities were regulated by equal
quantities of labour, a given amount of labour would, under
all circumstances,
exchange for that quantity of capital which
had been produced by the same amount of labour;
antecedent labour […] would always exchange
for the same amount of present labour […]
the[ll] value of
labour in relation to other commodities, in so far, at
least, as wages depend upon share, is determined, not by
equal quantities of labour, but by the proportion between
supply and demand” (Wakefield’s edition of Adam Smith,
An Inquiry into the Nature and Causes of the Wealth of
Nations, Vol. I, London, 1835, pp. 230-31, note).

Thus, according to Wakefield, profit would be
inexplicable if wages corresponded to the value of
labour.

In Vol. II of his edition of Adam Smith’s work Wakefield
remarks:

“Surplus produce […] always
constitutes rent: still rent may be paid, which does not
consist of surplus produce” (p. 216).

“If” (as in Ireland) “the
bulk of a people be brought to live upon potatoes, and in
hovels and rags, and to pay, for permission so to live, all
that they can produce beyond hovels, rags, and potatoes,
then, in proportion as they put up with less, the owner of
the land on which they live, obtains mole, even though the
return to capital or labour should remain unaltered.
What the miserable tenants give up, the landlord
gathers. […] A[mm]fall in the standard of living
amongst the cultivators of the earth is another cause of
surplus produce… When wages fall, the effect upon
surplus produce is the same as a fall in the standard of
living: the whole produce remaining the same, the surplus
part is greater; the producers have less, and the landlord
more” (pp.220-21).

In this case, profit is called rent, just as it is
called interest when, for example, as in India, the
worker (although nominally independent) works with advances
he receives from the capitalist and has to hand over all the
surplus produce to the capitalist.

6. Stirling [Vulgarised Explanation of Profit by
the Interrelation of Supply and Demand]

“… the quantity of every
commodity […] must be so regulated that the supply of
each commodity shall bear a less proportion to the demand
for it than the supply of labour bears to the demand for
labour. The difference between the price or value of
the commodity, and the price or value of the labour worked
up in it […] constitutes the […]
profits”[nn] (op. cit.,
pp. 72-73).

When the values of commodities are exchanged with one
another according to their production costs, “the
value of these commodities may be said to be at
par” (p. 18).[oo]

Thus if demand and supply of labour correspond with one
another, then labour would be sold at its value
(whatever Stirling may understand by value). And if
demand and supply of the commodities in which the labour is
worked up do correspond, then the commodities would be sold
at their production costs, by which Stirling
understands the value of labour. The price of
the commodity would then be equal to the value of the labour
worked up in it. And the price of labour would be on a
par with its own value. The price of the
commodity would therefore be equal to the price of the
labour worked up in it. Consequently there would be no
profit or surplus.

Stirling explains profit, or the surplus, in this
way.

The supply of labour in relation to the demand for it
must be greater than the supply of commodities in which the
labour is worked up is in relation to the demand for
them. The matter must be so arranged that the
commodity is sold at a higher price than that paid for the
labour contained in it.

This is what Mr. Stirling calls explaining the phenomenon
of the surplus, whereas it is, in fact, nothing but a
paraphrase of what is supposed to be explained. If we
go into it further, then there are only three
possibilities. [1] The price of labour is on a par
with value, that is, the demand for and supply of labour
balance, the price of labour is equal to the value of
labour. In these circumstances, the commodities must
be sold above their value, or things must be arranged
in such a way that the supply is below the
demand. This is pure “profit upon
alienation”, except that the condition is stated
under which it is possible. [2] Or the demand for
labour is greater than the supply and the price [of labour]
is higher than its value. In these circumstances, the
capitalist has paid the worker more than the value of the
commodity, and the buyer must then pay the capitalist a
twofold surplus—first to replace the amount he [the
capitalist] has already paid to the worker and then his
profit. [3] Or the price of labour is below its
value and the supply of labour above the demand for
it. The surplus would then arise from
the fact that labour is paid below its value and
is sold [embodied in commodities] at its value or,
at least, above its price.

If one strips this of all nonsense, then Stirling’s
surplus is [here] due to the fact that labour is bought by
the capitalist below its value and is sold again
above its price in the form of commodities.

The other cases, divested of their ridiculous
form—according to which the producer has to
“arrange” matters in such a way that he is able
to sell his commodity above its value, or above “the
par of value”—mean nothing but that the
market price of a commodity rises above its
value, if the demand for it is greater than the
supply. This is certainly not a new discovery and
explains one sort of “surplus” which never
caused Ricardo or anyone else the slightest
difficulty. |XIV-851||

7. John Stuart Mill [Unsuccessful Attempts
to Deduce the Ricardian Theory of the Inverse
Proportionality Between the Rate of Profit and the Level of
Wages Directly from the Law of Value]

[a) Confusion of the Rate of Surplus-value with the Rate
of Profit. Elements of the Conception of “Profit
upon Alienation”. Confused Conception of the
“Profits Advanced” by the Capitalist]

||VII-319| In the booklet
mentioned above, which, in fact, contains all that is
original in Mr. John Stuart Mill’s writings about political
economy (in contrast to his bulky compendium), he says in
Essay IV—“On Profits, and
Interest”:

“Tools and materials, like other
things, have originally cost nothing but
labour… The labour employed in making the tools
and materials being added to the labour afterwards employed
in working up the materials by the aid of tools, the sum
total gives the whole of the labour employed in the
production of the completed commodity… To
replace capital, is to replace nothing but the wages of
the labour employed” ([John Stuart Mill, Essays
on some Unsettled Questions of Political Economy,
London, 1844,] p. 94).

This in itself is quite wrong, because the employed
labour and the wages paid are by no means identical.
On the contrary, the employed labour is equal to the sum of
wages and profit. To replace capital means to replace
the labour for which the capitalist pays (wages) and the
labour for which he does not pay but which he nevertheless
sells (profit). Mr. Mill is here confusing
“employed labour” and that portion of the
employed labour which is paid for by the capitalist who
employs it. This
confusion is itself no recommendation for his
understanding of the Ricardian theory, which he claims to
teach.

Incidentally, it should be noted in relation to constant
capital that though each part of it can be reduced to
previous labour and therefore one can imagine that at some
time it represented profit or wages or both, but once it
exists as constant capital, one part of it—for
example, seeds, etc.—can no longer be transformed into
profit or wages.

Mill does not distinguish surplus-value from
profit. He therefore declares that the rate of
profit (and this is correct for the surplus-value which
has already been transformed into profit) is equal to the
ratio of the price of the product to the price of its means
of production (labour included). (See
pp. 92-93.) At the same time he seeks to deduce the
laws governing the rate of profit directly from the
Ricardian law, in which Ricardo confuses surplus-value and
profit, land to prove] that “profits depend upon
wages; rising as wages fall, and falling as wages
rise”[p.94].

Mr. Mill himself is not quite clear about the
question which he seeks to answer. We will
therefore formulate his question briefly before we
hear his answer. The rate of profit is the ratio of
surplus-value to the total amount of the capital
advanced (constant and variable capital taken together)
while surplus-value itself is the excess of the quantity of
labour performed by the labourer over the quantity of labour
which is advanced him as wages; that is, surplus-value is
considered only in relation to the variable capital, or to
the capital which is laid out in wages, not in relation to
the whole capital. Thus the rate of surplus-value and
the rate of profit are two different rates, although profit
is only surplus-value considered from a particular point of
view. It is correct to say with regard to the rate of
surplus-value that it exclusively depends “upon wages;
rising as wages fall, and falling as wages
rise”. (But it would be wrong with regard to the
total amount of surplus-value, for this depends not only on
the rate at which the surplus labour of the individual
worker is appropriated but likewise on the number of workers
exploited at the same time.) Since the rate of profit
is the ratio of surplus-value to the total amount of capital
advanced, it is naturally affected and determined by the
fall or rise of surplus-value, and hence, by the rise or
fall of wages, but in addition to this, the rate of profit
includes factors ||320| which
are independent of it and not directly reducible to it.

Mr. John Stuart Mill, who, on the one hand,
directly identifies profit and surplus-value, like
Ricardo, and, on the other hand (moved by considerations
concerning the polemic against the anti-Ricardians), does
not conceive the rate of profit in the Ricardian
sense, but in its real sense, as the ratio of
surplus-value to the total value of the capital advanced
(variable capital plus constant capital), goes to great
lengths to prove that the rate of profit is determined
directly by the law which determines surplus-value
and can be simply reduced to the fact that the smaller the
portion of the working-day in which the worker works for
himself, the greater the portion going to the capitalist,
and vice versa. We will now observe his torment, the
worst part of which is that he is not sure which problem he
really wants to solve. If he had formulated the
problem correctly, it would have been impossible for him to
solve it wrongly in this way.

He says, then:

“Though […] tools, materials,
and buildings […] are themselves the produce of
labour […] yet the whole of their value is not
resolvable into the wages of the labourers by whom they were
produced.” <He says above that the replacement of
capital is the replacement of wages.> The profits
which the capitalists make on these wages, need to be
added. The last capitalist has to replace from his
product “not only the wages paid both by
himself and by the tool-maker, but also the profit of the
tool-maker, advanced by him himself out of his own
capital” (op. cit., p. 98).[pp] Hence “…
profits do not compose merely the surplus
after replacing the outlay; they also enter into the outlay
itself. Capital is expended partly in paying or
reimbursing wages, and partly in paying the profits of other
capitalists, whose concurrence was necessary in order to
bring together the means of production” (loc. cit.,
pp. 98-99). “An article, therefore, may be
the produce of the same quantity of labour as before,
and yet, if any portion of the profits which the last
producer has to make good to previous producers can be
economised, the cost of production of the article is
diminished… It is, therefore, strictly
true, that the rate of profit varies inversely as the cost
of production of wages” (op. cit., pp. 102-03).

We are naturally always working on the assumption here
that the price of a commodity is equal to its value.
It is on this basis that Mr. Mill himself carries on the
investigation.

Profit, in the passages quoted, appears first of all to
bear a very strong resemblance to profit upon alienation,
but let us proceed. Nothing is more wrong than to say
that (if it is sold at its value) an article is
“the produce of the same quantity of labour as
before” and at the same time that by some
circumstance
or other “the cost of production of the
article” can be diminished. <Unless it is in
the sense I first advanced, i.e., when I distinguished
between the [real] production cost of the article and the
production cost to the capitalist, since he does not pay a
part of the production costs. In this case, it is
indeed true that the capitalist makes his profit out of the
unpaid surplus labour of his own workers just as he may also
make it by under-paying the capitalist who supplies
him with his constant capital, that is, by not paying this
capitalist for a part of the sur-plus labour embodied in the
commodity and not paid for by this capitalist (and which
precisely for that reason constitutes his profit).
This amounts to the fact that he always pays for the
commodity less than its value. The rate of
profit (that is, the ratio of surplus-value to the total
value of the capital advanced) can increase either because
the quantity of capital [goods] advanced by the capitalist
becomes objectively cheaper (due to the increased
productivity of labour in those spheres of production which
produce constant capital) or because it be-comes
subjectively cheaper for the buyer, since he pays for the
goods at less than their value. For him,
it is then always the result of a smaller quantity of
labour.>

||321| What Mill says first
of all, is that the constant capital of the
capitalist who manufactures the last commodity resolves not
into wages alone, but also into profit. His line of
reasoning is as follows:

If it were resolvable into wages alone, then profit would
be the surplus accruing to the last capitalist after he has
reimbursed himself for all wages paid <and the whole
(paid) costs of the product could be reduced to wages>,
which would constitute the whole of the capital
advanced. The total value of the capital advanced
would be equal to the total value of the wages embodied in
the product. Profit would be the surplus over
this. And since the rate of profit is equal to the
ratio of this surplus to the total value of the capital
advanced, then the rate of profit would obviously rise and
fall in proportion to the total value of the capital
advanced, that is, in proportion to the value of
wages, the aggregate of which constitutes the capital
advanced. <This objection is, in fact, silly, if
we consider the general relation of profits and
wages. Mr. Mill needed only to put on one side that
part of the whole product which is resolvable into profit
(irrespective of whether it is paid to the last or to
the previous capitalists, the co-functionaries in the
production of the commodity) and then
put that part which resolves into wages on the other, and
the amount of profit would still be equal to the surplus
over the total amount of wages, and it could be asserted
that the Ricardian “inverse ratio” applied
directly to the rate of profit. It is not true,
however, that the whole of the capital advanced can be
resolved into profit and wages.> But the capital
advanced does not resolve itself into wages alone, but also
into profits advanced. Profit therefore is a surplus
not only over and above the wages advanced, but also over
the profits advanced. The rate of profit is
therefore determined not only by the surplus over wages, but
by the last capitalist’s surplus over the total sum of wages
plus profits, the sum of which, according to this
assumption, constitutes the whole of the capital
advanced. Hence this rate can obviously be altered not
only as a result of a rise or fall in wages, but also as a
result of a rise or fall in profit. And if we
disregarded the changes in the rate of profit arising from
the rise or fall in wages, that is, if we assumed—as
is done innumerable times in practice—that the value
of the wages, in other words, the costs of their production,
the labour-time embodied in them, remained the same,
remained unchanged, then, following the path outlined by
Mr. Mill, we would arrive at the pretty law that the rise or
fall in the rate of profit depends on the rise or fall of
profit.

“…if any portion of the
profits which the last producer has to make good to previous
producers can be economised, the cost of production of the
article is diminished” [loc. cit., p. 102].

This is in fact very true. If we assume that no
portion of the previous producers’ profit was a mere
surcharge—“profit upon alienation” as
James Stuart says, then every economy in one “portion
of profit” (so long as it is not achieved by the
latter producer swindling the previous one, that is, by not
paying him for the whole of the value contained in his
commodity) is an economy in the quantity of labour required
for the production of the commodity. (Here we
disregard the profit paid, for instance, for that time
during the period of production, etc., when the capital lies
idle.) For example, if two days were required to bring
raw materials—coal, for instance—from the pit to
the factory, and now only one day is required, then there is
an economy of one day’s work, but this applies as much to
that part of it which resolves into wages as to that which
resolves into profit.

After Mr. Mill has made it clear to himself that the rate
of surplus of the last capitalist, or the rate of
profit in general, depends not only on the direct ratio of
wages to profits, but on the ratio of the last profit, or
the profit on every particular capital, to the whole value
of the capital advanced, which is equal to the variable
capital (that laid out in wages) plus the constant
capital—that, in other words, ||322| the rate of profit is
determined not only by the ratio of profit to the part of
capital laid out in wages, that is, not only by the cost of
production or the value of wages, he continues:

“It is, therefore […] true,
that the rate of profits varies inversely as the cost of
production of wages” [loc. cit., p. 103].

Although it is false, it is nevertheless true.

The illustration which he now gives can serve as a
classical example of the way in which economists use
illustrations, and it is all the more astonishing since its
author has also written a book about the science of
logic.

“Suppose, for example, that 60
agricultural labourers, receiving 60 quarters of corn for
their wages, consume fixed capital and seed amounting to the
value of 60 quarters more, and that the result of their
operations is a produce of 180 quarters. When we
analyse the price of the seed and tools into its elements,
we find that they must have been the produce of the labour
of 40 men: for the wages of those 40, together with profit
at the rate previously supposed (50 per cent) make up 60
quarters. The produce, therefore, consisting of 180
quarters, is the result of the labour altogether of 100
men.”

Now[qq] supposing
that the amount of labour required remained the same, but as
a result of some discovery no fixed capital and seed were
needed. Whereas previously the outlay of 120
quarters was required to obtain a product of 180 quarters,
now an outlay of only 100 quarters is necessary to achieve
this result.

“The produce (180 quarters) is still
the result of the same quantity of 1abour as before
[…], the labour of 100 men. A quarter of corn,
therefore, is still, as before, the produce of
10/18 of a man’s labour, […]
A[rr]
quarter of corn, which is the remuneration of a single
labourer, is indeed the produce of the same quantity of
labour as before; but its cost of production is
nevertheless diminished. It is now the produce of
10/18 of a man’s labour, and nothing
else; whereas formerly it required for its production the
conjunction of that quantity of labour with[ss] an expenditure, in the form of
reimbursement of profit, amounting to one-fifth more.
If the cost of production of wages had remained the same as
before, profits could not have risen. Each labourer
received one quarter of corn; but one quarter of corn at
that time was the result of the same cost of production, as
1 1/5 quarter now. In order,
therefore, that each labourer should receive the same
cost of production, each must now receive one quarter of
corn, plus one-fifth” (op. cit., pp.99-103
passim).

“Assuming, therefore, that the
labourer is paid in the very article he produces, it is
evident that, when any saving of expense takes place in the
production of that article, if the labourer still receives
the same cost of production as before, he must receive an
increased quantity, in the very same ratio in which the
productive power of capital has been increased. But,
if so, the outlay of the capitalist will bear exactly the
same proportion to the return as it did before; and profits
will not rise. The variations, therefore, in the rate
of profits, and those in the cost of production of wages, go
hand in hand, and are inseparable. Mr. Ricardo’s
principle […] is strictly true,[tt] if by low wages be meant not
merely wages which are the produce of a smaller quantity of
labour, but wages which are produced at less cost, reckoning
labour and previous profits together” (loc. cit.,
p.104).

With regard to this wonderful illustration, we note first
of all that, as a result of a discovery, corn is supposed to
be produced without seeds (raw materials) and without fixed
capital; that is, without raw materials and without tools,
by means of mere manual labour, out of air, water and
earth. This ||323| absurd
presupposition contains nothing but the assumption that a
product can be produced without constant capital, that is,
simply by means of newly applied labour. In this case,
what he set out to prove has of course been proved, namely,
that profit and surplus-value are identical, and
consequently that the rate of profit depends solely on the
ratio of surplus labour to necessary labour. The
difficulty arose precisely from the fact that the rate of
surplus-value and the rate of profit are two different
things because there exists a ratio of surplus-value to the
constant part of capital—and this ratio we call the
rate of profit. Thus if we assume constant capital to
be zero, we solve the difficulty arising from the existence
of constant capital by abstracting from the existence of
this constant capital. Or we solve the difficulty by
assuming that it does not exist. Pro batum
est.[uu]

Let us now arrange the problem, or Mill’s illustration of
the problem, correctly.

According to the first assumption we have:

Constant capital (fixed capital and seed)

Variable capital (capital laid out in wages)

Total product

Profit

60 quarters

60 quarters (60 workmen)

180 quarters

60 quarters

It is assumed in this example that
the labour which is added to the constant capital amounts to
120 quarters and that, since every quarter represents the
wages of a working-day (or of a year’s labour, which is
merely a working-day of 365 working-days), the 180 quarters
contain only 60 working-days, 30 of which account for the
wages of the workers and 30 constitute profit. We thus
assume in fact that one working-day is embodied in 2
quarters and that consequently the 60 working-days of the 60
workmen are embodied in 120 quarters, 60 of which constitute
their wages and 60 constitute the profit. In other
words, the worker works one half of the working-day for
himself, to make up his wages, and one half for the
capitalist, thus producing the capitalist’s
surplus-value. The rate of surplus-value is therefore
100 per cent and not 50 per cent. On the other hand,
since the variable capital constitutes only half of the
total capital advanced, the rate of profit is not 60
quarters to 60 quarters, that is, not 100 per cent, but 60
quarters to 120 quarters and therefore only 50 per
cent. If the constant part of the capital had equalled
zero, then the whole of the capital advanced would have
consisted of only 60 quarters, i.e., only of the capital
advanced in wages, equalling 30 working-days; in this case,
profit and surplus-value, and therefore also their rates,
would be identical. Profit would then amount to 100
per cent and not 50 per cent; 2 quarters of corn would be
the product of one working-day, and 120 quarters the product
of 60 working-days, even though one quarter of corn would
only be the wages of one working-day and 60 quarters the
wages of 60 working-days. In other words, the worker
would only receive half, 50 per cent, of his product, while
the capitalist would receive twice as much—100%
calculated on his outlay.

What is the position with regard to the constant capital,
the 60 quarters? These were likewise the product of 30
working days, and if it is assumed with regard to this
constant capital that the elements which went into its
production are so made up that one-third consists of
constant capital and two-thirds of newly added labour, and
that the [rate of] surplus-value and the rate of profit are
also the same as before, we get the following
calculation:

Constant capital

Variable capital

Total product

Profit

20 quarters

20 quarters (wages for 20 workers)

60 quarters

20 quarters

Here again the rate of profit would
be 50 per cent and the rate of surplus-value 100 per
cent. The total product would be ||324| the product of 30
working-days, 10 of which however (equalling 20 quarters)
would represent the pre-existing labour (the constant
capital) and 20 working-days the newly added labour of 20
workers, each of whom would only receive half his product as
wages. Two quarters would be the product of one man’s
labour as in the previous case, although, again as
previously, one quarter would represent the wages of one
man’s labour and one quarter the capitalist’s profit, the
capitalist thus appropriating half of the man’s labour.

The 60 quarters which the last capitalist producer makes
as surplus-value mean a rate of profit of 50 per cent,
because these 60 quarters of surplus-value are calculated
not only on the 60 quarters advanced in wages but also on
the 60 quarters expended in seed and fixed capital, which
together amount to 120 quarters .

If Mill calculates that the capitalist who produces the
seed and the fixed capital—a total of 60
quarters—makes a profit of 50 per cent, if he assumes
further that the constant and variable capital enter into
the product in the same proportion as in the case of the
production of the 180 quarters, then it will be correct to
say that the profit equals 20 quarters, wages 20 quarters
and the constant capital 20 quarters. Since wages
equal one quarter [a day], then 60 quarters contain 30
working-days in the same way as 120 quarters contain 60
working-days.

But what does Mill say?

“When we analyse the price of the
seed and tools into its elements, we find that they must
have been the produce of the labour of 40 men: for the wages
of those 40, together with profit at the rate previously
supposed (50 per cent) make up 60 quarters” [op. cit.,
p. 99].

In the case of the first capitalist, who employed 60
workers, each of whom he paid one quarter per day as wages
(so that he paid out 60 quarters in wages), and laid out 60
quarters in constant capital, the 60 working-days resulted
in 120 quarters, of which, however, the workers only
received 60 in wages; in other words, wages amounted to only
half the product of the labour of 60 men. Thus the 60
quarters of constant capital were only equal to the product
of the labour of 30 men; if they consisted only of profit
and wages, then wages would amount to 30 quarters and profit
to 30 quarters, thus wages would equal the labour
of 15 men and profit as well. But the profit
amounted to only 50 per cent, since it is assumed that of
the 30 days embodied in the 60 quarters, 10 represent
pre-existing labour (constant capital) and only 10 are
allocated to wages. Thus, 10 days are embodied in
constant capital, 20 are newly added working-days, of which,
however, the workers only work 10 for themselves, the other
10 being for the capitalist. But Mr. Mill asserts that
these 60 quarters are the product of 40 men, while just
previously he said that 120 quarters were the product of 60
men. In the latter case, one quarter contains half a
working-day (although it is the wages paid for a whole
working-day); in the former, 3/4 of a
quarter would equal half a working-day, whereas the
one-third of the product (i.e., the 60 quarters) which is
laid out in constant capital has just as much value, that
is, it contains just as much labour-time, as any other third
part of the product. If Mr. Mill desired to convert
the constant capital of 60 quarters wholly into wages and
profit, then this would not make the slightest
difference as far as the quantity of labour-time embodied in
it is concerned. It would still be 30 working-days as
before, but now, since there would be no constant capital to
replace, profit and surplus-value would coincide.
Thus, profit would amount to 100 per cent, not to 50 per
cent as previously. Surplus-value also amounted to 100
per cent in the previous case, but the profit was only 50
per cent precisely because constant capital entered into the
calculation.

We have here, therefore, a doubly false manoeuvre on the
part of Mr. Mill.

In the case of the first 180 quarters, the difficulty
consisted in the fact that surplus-value and profit did not
coincide, because the 60 quarters surplus-value had to be
calculated not only on 60 quarters (that part of the total
product which represented wages) but ||325| on 120 quarters, i.e., 60
quarters constant capital plus 60 quarters wages.
Surplus-value therefore amounted to 100 per cent, and profit
only to 50 per cent. With regard to the 60 quarters
which constituted constant capital, Mr. Mill disposes of
this difficulty by assuming that, in this case, the whole
product is divided between capitalist and worker, i.e., that
no constant capital is required to produce the constant
capital, that is, the 60 quarters consisting of seed and
tools. The circumstance which had to be explained in
the case of capital I, is assumed to have disappeared
in the case of capital II, and in this way the problem
ceases to exist.

But secondly, after he has assumed that the value of the
60 quarters which constitute the constant capital of capital
I contains only [immediate] labour, but no pre-existing
labour, no constant capital, that profit and surplus-value
therefore coincide, and consequently also the rate of profit
and the rate of surplus-value, that no difference exists
between them, he then assumes, on the contrary, that just as
in the case of capital I, a difference between them does
exist, and that therefore the profit is only 50 per cent as
in the case of capital I. If a third of the product of
capital I had not consisted of constant capital, then profit
would have been the same as surplus-value; the whole product
consisted of only 120 quarters, equal to 60 working-days, 30
of which (equal to 60 quarters) are appropriated by the
workers and 30 (equal to 60 quarters) by the
capitalist. The rate of profit was the same as the
rate of surplus-value, that is, 100 per cent. It was
50 per cent because the 60 quarters of surplus-value were
not calculated on 60 quarters (wages) but on 120 quarters
(wages, seed and fixed capital). In the case of
capital II, he assumes that it contains no constant
capital. He also assumes that wages remain the same in
both cases—a quarter [of corn]. But he
nevertheless assumes that profit and surplus-value are
different, that profit amounts only to 50 per cent, although
surplus-value amounts to 100 per cent. In actual fact
he assumes that the 60 quarters, one-third of the total
product, contain more labour-time than another third of the
total product; he assumes that these 60 quarters are the
product of 40 working-days while the other 120 quarters were
the product of only 60.

In actual fact, however, there peeps out the old delusion
of profit upon alienation, which has nothing whatever to do
with the labour-time contained in the product and likewise
nothing to do with the Ricardian definition of value.
For he [Mill] assumes that the wages a man receives for
working for a day are equal to what he produces in a
working-day, i.e., that they contain as much labour-time as
he works. If 40 quarters are paid out in wages, and if
the profit amounts to 20 quarters, then the 40 quarters
embody 40 working-days. The payment for the 40
working-days is equal to the product of the 40
working-days. If 50 per cent profit, or 20 quarters,
is made on 60 quarters, it follows that 40 quarters are the
product of the labour of 40 men, for, according to the
assumption, 40 quarters constitute wages and each man
receives one quarter per day. But in that case
where do the other 20 quarters come from? The 40
men work 40 working-days because they receive 40
quarters. A quarter is therefore the product of one
working-day. The product of 40 working-days is
consequently 40 quarters, and not a bushel more.
Where, then, do the 20 quarters which make up the profit
come from? The old delusion of profit upon alienation,
of a merely nominal price increase on the product over and
above its value, is behind all this. But here it is
quite absurd and impossible, because the value is not
represented in money but in a part of the product
itself. Nothing is easier than to imagine
that—if 40 quarters of grain are the product of 40
workers,- each one of whom receives one quarter per day or
per year, they therefore receive the whole of their product
as wages, and if one quarter of grain in terms of money is
£3, 40 quarters are therefore £120—the
capitalist sells these 40 quarters for £180 and makes
£60, i.e., 50 per cent profit, equal to 20
quarters. But this notion is reduced to absurdity if
out of 40 quarters—which have been produced in 40
working-days and for which he pays 40 quarters—the
capitalist sells 60 quarters. He has in his possession
only 40 quarters, but he sells 60 quarters, 20 quarters more
than he has to sell.

||326| Thus first of all
Mill proves the Ricardian law, that is, the false Ricardian
law, which confuses surplus-value and profit, by means of
the following convenient assumptions:

1) he assumes that the capitalist who produces constant
capital does not himself in his turn need constant capital,
and thus he assumes out of existence the whole difficulty
which is posed by constant capital;

2) he assumes that, although the capitalist does not
[need] constant capital, the difference between
surplus-value and profit caused by constant capital
nevertheless continues to exist although no constant capital
exists;

3) he assumes that a capitalist who produces 40 quarters
of wheat can sell 60 quarters, because his total product is
sold as constant capital to another capitalist, whose
constant capital equals 60 quarters, and because capitalist
No. II makes a profit of 50 per cent on these 60
quarters.

This latter absurdity resolves itself into the notion of
profit upon alienation, which appears here so absurd only
because the profit is supposed to stem not from the nominal
value expressed in money, but from a part of the product
which has been sold. Thus, Mr. Mill, in seeking to
defend Ricardo, has abandoned
his basic concepts and fallen far behind Ricardo, Adam
Smith and the Physiocrats.

His first defence of Ricardo’s teachings therefore
consists in his abandoning them from the outset, namely,
abandoning the basic principle that profit is only a part of
the value of the commodity, i.e., merely that part of the
labour-time embodied in the commodity which the capitalist
sells in his product although he has not paid the
worker for it. Mill makes the capitalist pay the
worker for the whole of his working-day and still derive a
profit.

Let us see how he proceeds.

He does away with the need for seed and agricultural
implements in the production of corn by means of an
invention, that is, he does away with the need for constant
capital in the case of the last capitalist in the same way
as he abandoned seed and fixed capital in the case of the
producer of the first 60 quarters. Now he ought to
have argued as follows:

Capitalist No. I does not now need to lay out 60 quarters
in seed and fixed capital, for we have stated that his
constant capital equals zero. He therefore has to lay
out only 60 quarters for the wages of 60 workers who work 60
working-days. The product of these 60 working-days
amounts to 120 quarters. The workers receive only 60
quarters. The capitalist therefore makes 60 quarters
profit, i.e., 100 per cent. His rate of profit is
exactly equal to the rate of surplus-value, that is, it is
exactly equal [to the ratio] of the labour-time the workers
[worked for themselves to the labour-time they] worked not
for themselves, but for the capitalist. They worked 60
days. They produced 120 quarters, they received 60
quarters in wages. They thus received the product of
30 working-days as wages, although they worked 60
days. The quantity of labour-time which 2 quarters
cost is still equal to one working-day. The
working-day for which the capitalist pays is still
equal to one quarter, i.e., it is equal to half the
working-day worked. The product has fallen by a third,
from 180 quarters to 120 quarters, but the profit has
nevertheless risen by 50 per cent, namely, from 50 per cent
to 100 per cent. Why? Of the total of 180
quarters, a third merely replaced constant capital, it did
not therefore constitute a part of either profit or
wages. On the other hand, the 60 quarters, or the 30
working-days during which the workers produced or worked for
the capitalist, were calculated not on the 60
quarters spent on wages, that is, the 30 days during which
they worked
for themselves, but on the 120 quarters, i.e., the 60
working-days, which were expended on wages, seed and fixed
capital. Thus, although out of the total of 60 days
they worked 30 days for themselves and 30 for the
capitalist, and although a capital outlay of 60 quarters on
wages yielded 120 quarters to the capitalist, his rate of
profit was not 100 per cent, but only 50 per cent, because
it was calculated differently, in the one case on
2×60 and in the other on 60. The surplus-value
||327| was the same, but the
rate of profit was different.

But how does Mill tackle the problem?

He does not assume that the capitalist [who, as a result
of an invention, spends nothing on constant capital] with an
outlay of 60 quarters obtains 120 quarters (30 out of 60
working-days), but that he now employs 100 men who produce
180 quarters for him, always on the supposition that the
wage for one working-day is one quarter of wheat. The
calculation is therefore as follows:

Capital expended (only variable, only on
wages)

Total product

Profit

100 quarters (wages for 100 working-days)

180 quarters

80 quarters

This means that the capitalist makes a profit of 80 per
cent. Profit is here equal to surplus-value.
Therefore the rate of surplus-value is likewise only 80 per
cent. Previously it was 100 per cent, i.e., 20 per
cent higher. Thus we have the phenomenon that the rate
of profit has risen by 30 per cent while the rate of
surplus-value has fallen by 20 per cent.

If the capitalist had only expended 60 quarters on wages
as he did previously, we would have the following
calculation:

100

quarters

yield

80

quarters

surplus-value

10

"

"

8

"

"

60

"

"

48

"

"

But 60 quarters previously yielded 60 quarters [of
surplus-value] (that means it has fallen by 20 per
cent). Or to put it another way, previously:

[Capital expended]

Total product

Profit

60 quarters

120 quarters

60 quarters

100 "

200 "

100 "

100 "

200 "

100 "

Thus the surplus-value has fallen
by 20 per cent, from 100 to 80 (we must take 100 as the
basis of the calculation in both [cases]).

(60:48=100:80; 60:48=10:8; 60:48=5:4; 4×60=240 and
48 × 5 =240.)

Further, let us consider the labour-time or the value of
a quarter. Previously, 2 quarters were equal to one
working-day, or one quarter was equal to half a working-day
or 9/18 of a man’s labour. As
against this, 180 quarters are now the product of 100
working-days, one quarter is therefore the product of
100/180 or 10/18
of a working-day. That is, the product has become
dearer by 1/18 of a working-day, or
the labour has become less productive, since previously a
man required 9/18 of a working-day to
produce a quarter, whereas now he requires
10/18 of a working-day. The rate
of profit has risen although the surplus-value has fallen
and, consequently, the productivity of labour has fallen or
the real value, the cost of production, of wages has risen
by 1/18 or by 5
5/9 per cent. 180 quarters were
previously the product of 90 working-days (1 quarter,
90/180, equals half a working-day or
9/18 of a working-day). Now they
are the product of 100 working-days (1 quarter =
100/180=10/18 of
a working-day).

Let us assume that the working-day lasts 12 hours, i.e.,
60×12 or 720 minutes. ||328| One-eighteenth part of a
working-day, that is, 720/18 therefore
amounts to 40 minutes. In the first case, the worker
gives the capitalist 9/18 or half of
these 720 minutes, that is, 360 minutes. 60 workers
will therefore give him 360×60 minutes. In the
second case, the worker gives the capitalist only
8/18, that is, 320 minutes out of the
720. But the first capitalist employs 60 men and
therefore obtains 360×60 minutes. The second
employs 100 men and therefore obtains 100×320, 32,000
minutes. The first gets 360 × 60, 21,600
minutes. Thus the second capitalist makes a larger
profit than the first because 100 workers at 320 minutes a
day amounts to more than 60 [workers] at 360 minutes.
His profit is bigger only because he employs 40 more men,
but he obtains relatively less from each worker. He
has a higher profit, although the rate of surplus-value has
declined, that is, the productivity of labour has declined,
the production costs of real wages have therefore risen, in
other words, the quantity of labour embodied in them has
risen. But Mr. Mill wanted to prove the exact
opposite.

Assuming that Capitalist No. I, who has not
“discovered” how to produce corn without seed or
fixed capital, likewise uses 100 working-days (like
capitalist No. II), whereas he only uses 90 days in the
above calculation. He must therefore use 10 more
working-days, 3 1/3 of which are
accounted for by his constant capital (seed and fixed
capital) and 3 1/3 by wages. The
product of these 10 working-days on the basis of the old
level of production would be 20 quarters, 6
2/3 quarters of which, however, would
replace constant capital,[vv] while 12
4/3 quarters would be the product of 6
2/3 working-days. Of this, wages
would take 6 2/3 quarters and
surplus-value 6 2/3 quarters.

We would thus arrive at the following calculation:

Constant capital

Wages

Total product

Surplus-value

Rate of Surplus-value

662/3 quarters

662/3 quarters

200 quarters

662/3 quarters

100 per cent

(331/3 working-days)

(Wages for 662/3 working-days)

(100 working-days)

(331/3 working-days)

He makes a profit of 33 1/3
working-days on the total product of 100 working-days.
Or 66 2/3 quarters on 200
quarters. Or, if We calculate the capital he lays out
in quarters, he makes a profit of 66
2/3 quarters on 133
1/3 quarters (the product of 66
2/3 working-days), whereas capitalist
No. II makes a profit of 80 quarters on an outlay of 100
quarters. Thus, the profit of the second capitalist is
greater than that of the first. Since the first
capitalist produces 200 quarters in the same labour-time
that it takes the second to produce 180, for the first
capitalist one quarter is equal to half a working-day and
for the second capitalist one quarter is equal to
10/18 or 5/9 of
a working-day, that is, it contains
1/18 more labour-time and would
consequently be dearer, and the first capitalist would drive
the second out of business. The latter would have to
give up his discovery and accommodate himself to using seed
and fixed capital in corn production, as before.

Let us assume that the profit of capitalist I amounted to
60 quarters on an outlay of 120 quarters, or to 50 per cent
(the same as 66 2/3 quarters on 133
1/3 quarters).

The profit of capitalist II amounted to 80 quarters on
100 quarters, or to 80 per cent.

The profit of the second capitalist compared to that of
the first is 80:50, or 8:5, or 1 :
5/8.

As against this, the surplus-value of the second
capitalist compared to that of the first is: 80 : 100, or 8
: 10, or 1 : 10/8, or 1 : 1
2/8, or 1
1/4.

The rate of profit of the second capitalist is 30 per
cent higher than that of the first.

The surplus-value of the second capitalist is 20 per cent
smaller than that of the first.

The second capitalist employs 66
2/3 per cent more workers, while the
first one appropriates only 1/8, or 12
1/2 per cent, more labour in a single
day.

||329| Mr. Mill has
therefore proved that capitalist No. I—who uses a
total of 90 days, 1/3 of which [is
embodied] in constant capital (seed, machinery, etc.), and
employs 60 workers whom, however, he pays only [the product
of] 30 days—produces one quarter of corn in half a
clay or in 9/18 of a day; so that in
90 working-days he produces 180 quarters, 60 quarters of
which represent the 30 working-days contained in the
constant capital, 60 quarters the wages for 60 working-days
or the product of 30 working-days, and 60 quarters the
surplus-value (or the product of 30 working-days). The
[rate of] surplus-value of this capitalist is 100 per cent,
his [rate of] profit is 50 per cent, for the 60 quarters of
surplus-value are not calculated on the 60 quarters of the
capital laid out in wages, but on 120 quarters, i.e., both
parts of capital (that is, variable capital plus constant
capital).

He has proved further that capitalist No. II, who uses
100 working-days and lays out nothing in constant capital
(by virtue of his discovery), produces 180 quarters, one
quarter is therefore equal to 10/18 of
a day, i.e., it is 1/18 of a day (40
minutes) dearer than that of No. I. His labour is
1/18 less productive. Since the
worker receives a daily wage of one quarter, as he did
previously, his wages have risen by
1/18 in real value, that is, in the
labour-time required for their production. Although
the production cost of wages has now risen by
1/18 and the total product is smaller
in relation to labour-time, and the surplus-value
produced by him amounts only to 80 per cent,
whereas that of No. I was 100 per cent, his rate of profit
is 80 per cent, while that of the first was 50.
Why? Because, although the cost of wages has risen for
capitalist No. II, he employs more labour, and because the
rate of surplus-value is equal to the rate of profit in the
case of No. II, since his surplus-value is calculated only
on the capital laid out in wages, the constant capital
amounting to zero. But Mill wanted on the contrary to
prove that the rise in the rate of profit was due to a
reduction in the production cost of wages according
to the Ricardian law. We have seen that this rise took
place despite the increase in the production cost of
wages, that, consequently, the Ricardian law is false if
profit and surplus-value are directly identified with
one another, and the rate of profit is understood as the
ratio of surplus-value or gross profit (which is equal to
the surplus-value) to the total value of the capital
advanced.

Mr. Mill continues:

“A return of 180 quarters could not
before be obtained but by an outlay of 120 quarters; it can
now be obtained by an outlay of not more than
100…”[loc. cit., p. 100].

Mr. Mill forgets that in the first case, the outlay of
120 quarters represents an outlay of 60 working-days.
And that in the second case, the outlay of 100 quarters
represents an outlay of 55 6/9
working-days (that is, a quarter equals
9/18 of a working-day in the first
case and 10/18 in the second).

“The produce (180 quarters) is still
the result of the [same] quantity of labour as before,
[namely] the labour of 100 men” [loc. cit.,
p. 100].

(Pardon me! The 180 quarters were previously the
result of 90 working-days. Now they are the result of
100.)

“A quarter of corn, therefore, is
still […] the produce of 10/18
of a man’s labour” [loc. cit., p. 100].

(Pardon me! It was previously the produce of
9/18 of a man’s labour.)

“A[ww] quarter of corn,
which is the remuneration of a single labour, is
indeed the produce of the same […] labour
as before …”[loc. cit., p. 102].

(Pardon me! Firstly, now a quarter of corn is
“indeed the produce” of
10/18 of a working-day, whereas
previously it was the produce of 9/18;
it therefore costs 1/18 of a day more
labour;
and secondly, whether the quarter costs
9/18 or 10/18 of
his working-day, the remuneration of an individual
worker should never be confused with the product of his
labour; since it is always only a part of that
product.)

“It is now the produce of
10/18 of a man’s labour, and
nothing else” (this is correct); “whereas
formerly it required for its production the conjunction of
that quantity of labour with[xx] an expenditure, in the form of
reimbursement of profit, amounting to one-fifth more”
[loc. cit., pp. 102-03].

Stop! First of all it is wrong, as has been ||330| emphasised repeatedly, to say
that one quarter previously cost 10/18
of the working-day. It only cost
9/18. It would be even more
wrong (if a gradation in absolute falsehood were possible)
if there were added to these 9/18 of a
working-day “the conjunction […] of
reimbursement of profit, amounting to one-fifth
more”. In 90 working-days (taking constant and
variable capital together) 180 quarters are produced.
180 quarters are equal to 90 working-days. One quarter
equals 90/180, which equals
9/18, which equals one half of a
working-day. Consequently, no
“conjunction” whatsoever is added to these
9/18 of a working-day, or to the half
of a working-day which a quarter costs in case No. I.

We here discover the real delusion which is the centre
around which the whole of this nonsense revolves. Mill
first of all made a fool of himself by supposing that, if
120 quarters are the product of 60 days of labour, and this
product is equally divided between the 60 labourers and the
capitalist, the 60 quarters which represent the constant
capital could be the product of 40 days of labour.
They could only be the product of 30 days, in whatever
proportion the capitalist and the labourers producing the 60
quarters might happen to share in them. But let us
proceed. In order to make the delusion quite clear,
let us assume that not one-third, i.e., 20 quarters of the
60 quarters of constant capital, would be converted into
profit, but the whole amount of the 60 quarters. We
can make this assumption all the more readily since it is
not in our interest, but in Mill’s, and simplifies the
problem. Moreover it is easier to believe that the
capitalist who produces 60 quarters of constant capital,
discovers that 30 workers, who produce 60 quarters or
an equivalent value in 30 days, can be made to work for
nothing, without being paid any wages at all (as
happens in the case of statute
labour), than to believe in the ability of Mill’s
capitalist to produce 180 quarters of corn without seed or
fixed capital, simply by means of a
“discovery”. Let us therefore assume that
the 60 quarters contain only the profit of capitalist II,
the producer of constant capital for capitalist I, since
capitalist II has the product of 30 working-days to sell
without having paid a single farthing to the 30 workers,
each of whom worked one day. Would it then be correct
to say that these 60 quarters, which can be entirely
resolved into profit, enter into the production cost of
wages on the part of capitalist I, in
“conjunction” with the labour-time worked by
these workers?

Of course, the capitalist and the workers in case No. 1
could not produce 120 quarters or even one single quarter
without the 60 quarters which constitute constant capital
and which are resolvable into profit only. These are
conditions of production necessary for them, and conditions
of production, moreover, which have to be paid for.
Thus the 60 quarters were necessary to produce 180. 60
of these 180 quarters replace the 60 quarters [constant
capital]. Their 120 quarters—the product of 60
working-days—are not affected by this. If they
had been able to produce the 120 quarters without the 60,
then their product, the product of the 60
working-days, would have been the same, but the total
product would have been smaller, precisely because the 60
pre-existing quarters would not have been reproduced.
The capitalist’s rate of profit would have been greater
because his production costs would not have included the
expenditure on, or the cost of, the means of production
which enable him to make a surplus-value of 60
quarters. The absolute amount of profit would have
been the same—60 quarters. These 60 quarters,
however, would have required an outlay of only 60
quarters. Now they require an outlay of 120.
This outlay on constant capital therefore enters into the
production costs of the capitalist, but not into the
production costs of wages.

Let us assume that capitalist III, also without paying
his workers, can produce 60 quarters in 15 working-days
[instead of 30] by means of some “discovery”,
partly because he uses better machines, and so on.
This capitalist III would drive capitalist II out of the
market and secure the custom of capitalist I. The
capitalist’s outlay would now have fallen ||331| from 60 to 45
working-days. The workers would still require 60
working-days to transform the 60 quarters into 180.
And they would need 30 working-days in order to produce
their
wages. For them one quarter would be equal to half
a working-day. But the 180 quarters would only cost
the capitalist an outlay of 45 working-days instead of
60. Since however it would be absurd to suggest that
corn under the name of seed costs less labour-time than it
does under the name of corn pure and simple, we would have
to assume that in the case of the first 60 quarters, seed
corn costs just as much as it did previously, but that less
seed is necessary, or that the fixed capital which forms
part of the value of the 60 quarters has become cheaper.

***

Let us write down the results so far obtained from the
analysis of Mill’s “illustration”.

First, it has emerged that:

Supposing that the 120 quarters were produced without any
constant capital and were the product of 60 working-days as
they were previously, whereas formerly, the 180 quarters, 60
quarters of which were constant capital, were the product of
90 working-days. In this case, the capital of 60
quarters laid out in wages, equal to 30 working-days but
commanding 60 working-days, would produce the same product
as formerly, namely, 120 quarters. The value of the
product would likewise remain unchanged, that is, one
quarter would be equal to half a working-day.
Previously the product was equal to 180 instead of 120 as at
present; but the 60 additional quarters represented only the
labour-time embodied in the constant capital. The cost
of production of wages has thus remained unchanged, and the
wages themselves—in terms of both use-value and
exchange-value—have also remained unchanged—one quarter being equal to half a working-day.
Surplus-value would similarly remain unchanged, namely, 60
quarters for 60 quarters, or half a working-day for half a
working-day. The rate of surplus-value in both cases
was 100 per cent. Nevertheless the rate of profit was
only 50 per cent in the first case, while it is now 100 per
cent. Simply because 60 : 60=100 per cent, while 60 :
120=50 per cent. The increase in the rate of profit,
in this case, is not [due] to any change in the production
cost of wages, but merely to the fact that constant capital
has been assumed to be zero. The position is similar
when the value of constant capital diminishes, and with it
the value of the capital advanced; that is, the
proportion of surplus-value to capital increases, and
this proportion is the rate of profit.

To obtain the rate of profit surplus-value is not only
calculated on that part of capital which really increases
and creates surplus-value, namely, the part laid out in
wages, but also on the value of the raw materials and
machinery whose value only reappears in the product.
It is calculated moreover on the value of the whole of the
machinery, not only on the part which really enters into the
process of creating value, i.e., the part whose wear and
tear has to be replaced, but also on that part which enters
only into the labour process.

Secondly, in the second example it was assumed
that capital I yields 180 quarters, equal to 90
working-days, so that 60 quarters (30 working-days)
represent constant capital; 60 quarters are variable capital
(representing 60 working-days, for 30 of which the workers
are paid); thus wages amount to 60 quarters (30
working-days) and surplus-value to 60 quarters (30
working-days on the other hand, the product of capital II
represents 100 working-days although it likewise comes to
180 quarters, 100 quarters of which are wages, and 80
surplus-value. In this case, the whole of the capital
advanced is laid out in wages. Here constant capital
is at zero; the real value of wages has risen although the
use-value the workers receive has remained the
same—one quarter; but a quarter is now equal to
10/18 of a working-day whereas
previously it was only worth
9/18. The [rate of]
surplus-value has declined from 100 per cent to 80 per cent,
that is, by 1/5 or by 20 per
cent. The rate of profit has increased from 50 per
cent to 80 per cent, that is, by 3/5
or by

60 per cent. In this case, therefore, the real
production cost of wages has not simply remained unchanged,
but has risen. Labour has become less productive and
consequently the surplus labour has diminished. And
yet the rate of profit has risen. Why? First of
all, because in this case there is no constant capital and
the rate of profit is consequently equal to the rate of
surplus-value. In all cases where capital is not
exclusively laid out on wages—an almost impossible
contingency in capitalist production—the rate of
profit must be smaller than the rate of surplus-value and it
must be smaller in the same proportion as the total value of
the capital advanced is greater than the value of the part
of the capital laid out in wages. Secondly, [the rate
of profit has risen because] capitalist II employs a
considerably greater number of workers than capitalist I,
thus more
than counterbalancing the difference in the productivity
of the labour they respectively employ.

Thirdly, from one point of view, the cases
outlined under the headings “firstly” and
“secondly” are a conclusive proof that
variations in the rate of profit can take place quite
independently of the cost of production of wages. For
under the heading “firstly” it was
demonstrated that the rate of profit can rise although the
cost of production of labour remains the same. Under
“secondly” it was demonstrated that the
rate of profit for capital II compared with that for capital
I rises although the productivity of labour declines, in
other words, although the production cost of wages
rises. This case therefore proves ||VIII-332| that if, on the other
hand, we compare capital I with capital II, the rate of
profit falls although the rate of surplus-value rises, the
productivity of labour increases and consequently the
production costs of wages fall. They amount to only
9/18 of a working-day [per quarter]
for capital I, whereas for capital II they amount to
10/18 of a working-day; but despite
this, the rate of profit is 60 per cent higher in the case
of capital II than in the case of capital I. In all
these cases, not only are variations in the rates of profit
not determined by variations in the production costs of
wages, but they take place in the same
proportions. Here it must be noted that it does
not follow from this that the movement of one is the
cause of movement of the other (for example, that the
rate of profit does not fall because the production costs of
wages fall, or that it does not rise because the production
costs of wages rise), but only that different circumstances
paralyse the opposite movements. Nevertheless, the
Ricardian law that variations in the rate of profit take
place in the opposite direction to variations in wages, that
one rises because the other falls, and vice versa, is
false. This law applies only to the rate of
surplus-value. At the same time, there exists
however a necessary connection (although not always) in the
fact that the rate of profit and the value of wages rise and
fall not in the opposite but in the same direction.
More manual labour is employed where the labour is less
productive. More constant capital is applied where the
labour is more productive. Thus in this context the
same circumstances which bring about an increase or a
decline in the rate of surplus-value, must as a consequence
bring about a decline or an increase in the rate of profit
[i.e., a movement] in the opposite direction.

[b) Apparent Variation in the Rate of Profit Where the
Production of Constant Capital Is Combined with Its Working
Up by a single Capitalist]

But we shall now outline the case
as Mill himself conceived it, although he did not formulate
it correctly. This will at the same time clarify the
real meaning of his talk about the profits advanced by the
capitalist.

Despite any kind of “discovery” and any
possible “conjunction”, the example cannot be
left in the form in which Mill puts it forward, because it
contains absolute contradictions and absurdities and the
various presuppositions he makes cancel one another out.

Of the 180 quarters, 60 quarters (seed and fixed capital)
are supposed to consist of 20 quarters for profit and 40
quarters [wages] for 40 working-days, so that if the 20
quarters profit are omitted, the 40 working-days still
remain. According to this presupposition, the workers
therefore receive the whole product for their labour, and
consequently it is absolutely impossible to see where the 20
quarters profit and their value come from. If it is
assumed that they are merely nominal additions to the price,
if they do not constitute labour-time appropriated by the
capitalist, their omission would be just as profitable as if
20 quarters wages for workers who had not done any work were
included in the 60 quarters. Furthermore, the 60
quarters here simply express the value of the constant
capital. They are however supposed to be the product
of 40 working-days. On the other hand, it is assumed
that the remaining 120 quarters are the product of 60
working-days. But here working-days must be understood
as equal average labour. The assumption is therefore
absurd.

Thus one must assume, firstly, that in the 180 quarters
only 90 working-days are embodied and in the 60 quarters,
that is, the value of the constant capital, only 30
working-days. The assumption that the
profit—amounting to 20 quarters or to 10
working-days—can be omitted, is once again
absurd. For it must then be assumed that the 30
workers employed in the production of constant capital,
although not working for a capitalist, are nevertheless so
obliging that they are content to pay themselves wages which
only amount to half their labour-time, and not to reckon the
other half in their commodity. In a word, that that
they sell their working-day 50 per cent below its value.

Hence this assumption too is absurd.

But let us assume that capitalist I, instead of buying
his constant capital from capitalist II and then working it
up, combines both the production and the working up of
constant capital in his own undertaking. He thus
supplies seed, agricultural implements, etc., to
himself. Let us likewise ignore the discovery which
makes seed and fixed capital unnecessary. Supposing
that he expends 20 quarters (equal to 10 working-days) on
constant capital (for the production of his constant
capital) and 10 quarters on wages for 10 working-days, of
which the workers work 5 days for nothing, the calculation
would then be as follows:

||333|

Constant Capital

Variable capital for 80 workers

surplus-value

Total product

20 quarters

60+20=80 qrs. (wages for 80 working-days)

60+20=80 qrs.

180 qrs.

(10 working-days)

(=40 working-days)

(=40 working-days)

(=90 working-days)

The actual production costs of wages have remained the
same, and consequently the productivity of labour too.
The total product has remained the same, that is, 180
quarters, and the value of the 180 quarters has also
remained unchanged. The rate of surplus-value has
remained the same—80 quarters over 80 quarters.
The total amount or quantity of surplus-value has risen from
60 quarters to 80 quarters, that is, by 20 quarters.
The capital advanced has fallen from 120 to 100
quarters. Previously, 60 quarters were made on 120
quarters, or a rate of profit of 50 per cent. Now 80
quarters are made on 100 quarters, or a rate of profit of 80
per cent. The total value of the capital advanced has
fallen from 120 quarters by 20 quarters and the rate of
profit has risen from 50 per cent to 80 per cent. The
profit itself, irrespective of its rate, now amounts to 80
quarters, whereas previously it was 60 quarters, that is, it
has risen by 20 quarters, or as much as the amount (not the
rate) of the surplus-value.

Thus there has been no change here, no variation in the
production costs of real wages. The rise in the rate
of profit is due:

Firstly, to the fact that although the rate of
surplus-value
has not risen, the total amount has increased from 60
quarters to 80 quarters, that is, by a third; and it has
risen by a third, by 33 1/3 per cent,
because the capitalist now employs 80 workers and not 60 as
previously, that is, he exploits a third or 33
1/3 per cent more living labour; and
obtains the same rate of surplus-value from the 80 workers
he now employs as previously when he employed only 60
workers.

Secondly. While the absolute magnitude of
surplus-value (that is, the total profit) has risen by 33
1/3 per cent, i.e., from 60 to 80
quarters, the rate of profit has risen from 50 per cent to
80 per cent, by 30, that is, by 3/5
(since 1/5 of 50 is 10, and
3/5 30), i.e., by 60 per cent.
That is to say, the value of the capital laid out has fallen
from 120 [quarters] to 100, although the value of the part
of capital laid out in wages has risen from 60 to 80
quarters (from 30 to 40 working-days). This part of
the capital has increased by 10 working-days (20
quarters). On the other hand, the constant portion of
capital has decreased from 60 to 20 quarters (from 30
working-days to 10), that is, by 20 working-days. If
we subtract the 10 working-days by which the part of capital
laid out in wages has increased, then the total capital
expended decreases by 10 working-days (20 quarters).
Previously, it amounted to 120 quarters (60
working-days). Now it amounts to only 100 quarters (50
working-days). It has therefore decreased by a sixth,
that is, by 16 2/3 per cent.

Incidentally, this whole variation in the rate of profit
is only an illusion, only a transfer from one account book
to another. Capitalist I has 80 quarters profit
instead of 60 quarters, that is, an additional profit of 20
quarters. This, however, is the exact amount of profit
that the producer of constant capital made previously and
which he has now lost because capitalist I, instead of
buying his constant capital, now produces it himself, that
is, instead of ||334| paying
capitalist II the surplus-value of 20 quarters (10
working-days) which the producer [of constant capital]
obtained from the 20 workers employed by him, capitalist I
now keeps it for himself.

80 quarters profit is made on 180 quarters as previously,
the only difference being that previously it was divided
between two people. The rate of profit appears to be
bigger, because previously capitalist I regarded the 60
quarters as constant capital only, which in fact they were
for him; he therefore disregarded the profit accruing to the
producer of constant capital. The rate of profit has
not altered, any more than the
surplus-value or any factor of production, including the
productivity of labour. Previously, the capital laid
out by the producer [of constant capital] amounted to 40
quarters (20 working-days); that [variable capital] laid out
by capitalist I amounted to 60 quarters (30
working-days), making a total of 100 quarters (50
working-days), and the profit of the first capitalist came
to 20 quarters, that of the other to 60, together 80
quarters (40 working-days). The whole product
amounting to 90 working-days (180 quarters) yielded 80
quarters profit on 100 laid out in wages and constant
capital. For society, the revenue deriving from the
profit has remained the same as before, and so has the ratio
of surplus-value to wages.

The difference arises from the fact that, when the
capitalist enters the commodity market as a buyer, he is
simply a commodity owner. He has to pay the full value
of a commodity, the whole of the labour-time embodied in it,
irrespective of the proportions in which the fruits of the
labour-time were divided or are divided between the
capitalist and the worker. If, on the other hand, he
enters the labour market as a buyer, he buys in actual fact
more labour than he pays for. If, therefore, he
produces his raw materials and machinery himself instead of
buying them, he himself appropriates the surplus labour he
would otherwise have had to pay out to the seller of the raw
materials and machinery.

It certainly makes a difference to the individual
capitalist although not to the rate of profit, whether he
himself derives a profit or pays it out to someone
else. (In calculating the reduction in the rate of
profit as a result of the growth of constant capital, the
social average is always taken as the basis, that is, the
aggregate amount of constant capital employed by society at
a particular moment and the proportion of this amount to the
amount of capital laid out directly in wages.) But
this point of view is seldom decisive and can seldom be
decisive even for the individual capitalist with regard to
such complex enterprises which do occur, for example, when
the capitalist is at the same time engaged in spinning and
weaving, making his own bricks, etc. What is decisive
here is the real saving in production costs, through saving
of time on transport, savings on buildings, on heating, on
power, etc., greater control over the quality of the raw
materials, etc. If he himself decided to manufacture
the machines he required, he would then produce them on a
small scale like a small producer who works to supply
his
own needs or the individual needs of a few customers, and
the machines would cost him more than they would if he
bought them from a machine manufacturer who produced them
for the market. Or if he wished at the same time to
spin and to weave and to make machines not only for himself,
but also for the market, he would require a greater amount
of capital, which he could probably invest to greater
advantage (division of labour) in his own enterprise.
This point of view can only apply when he provides for
himself a market sufficient to enable him to produce his
constant capital himself on an advantageous scale. His
own demand must be large enough to achieve this. In
this case, even if his work is less productive than that of
the proper producers of constant capital, he appropriates a
share of the surplus labour for which he would otherwise
have to pay another capitalist.

It can be seen that this has nothing to do with the rate
of profit. If—as in the example cited by
Mill—90 working-days and 80 workers were involved
previously, then nothing is saved from the production costs
by the fact that the surplus labour of 40 days (or 80
quarters) contained in the product is now pocketed by one
capitalist instead of by two, as was the case
previously. The 20 quarters profit (10 working-days)
simply disappears from one account book in order to appear
again in another.

This saving on previous profit, if it does not coincide
with a saving in labour-time and thus with a saving in
wages, is therefore a pure delusion.

[c) On the Influence a Change in the value of Constant
Capital Exerts on surplus-value, Profit and Wages]

||335|Fourthly,
there remains the case in which the value of constant
capital decreases as a result of the increased productivity
of labour, and it remains for us to investigate whether or
not, and to what extent, this case is related to the real
production cost of wages or to the value of labour.
The question is, therefore, to what extent a real change in
the value of constant capital causes at the same time a
variation in the ratio of profit to wages. The value
of constant capital, its production costs, can remain
constant, yet more or less of it can be embodied in the
product. Even if its value is assumed to be constant,
the constant capital will increase in the measure that the
productivity of labour and production on a large scale
develop.
Variations in the relative amount of constant capital
employed while the production costs of the constant capital
remain stable or rise—variations which all affect
the rate of profit—are excluded in advance from this
investigation.

Furthermore, all branches of production whose products do
not enter directly or indirectly into the consumption of the
workers are likewise excluded. But variations in the
real rate of profit (that is, the ratio of the surplus-value
really produced in these branches of industry to the capital
expended) in these branches of industry affect the general
rate of profit, which arises as a result of the levelling of
profits, just as much as variations in the rate of profit in
branches of industry whose products enter directly or
indirectly into the consumption of the workers.

The question moreover must be reduced to the following:
How can a change in the value of constant capital
retrospectively affect the surplus-value? For once
surplus-value is assumed as given, the ratio of surplus to
necessary labour is given, and therefore also the value of
wages, i.e., their production cost. In these
circumstances, no change in the value of constant capital
can have any effect on the value of wages, any more than on
the ratio of surplus labour to necessary labour, although it
must always affect the rate of profit, the cost of
production of the surplus-value for the capitalist, and in
certain circumstances, namely, when the product enters into
the consumption of the worker, it affects the quantity of
use-values into which wages are resolved, although it does
not affect the exchange-value of wages.

Let us assume that wages are given, and that, for
example, in a cotton factory they come to 10 working hours
and surplus-value to 2 working hours. The price of raw
cotton falls by half as a result of a good harvest.
The same quantity of cotton which previously cost the
manufacturer £100, now costs him only £50.
The same amount of cotton requires just the same amount of
spinning and weaving as it did before. With an
expenditure of £50 for cotton, the capitalist can now
acquire as much surplus labour as he did previously with an
expenditure of £100, or, should he continue to spend
£100 on cotton, he will now receive, for the same
amount of money as he spent before, a quantity of cotton
from which he will be able to acquire twice the amount of
surplus labour. In both cases, the rate of
surplus-value, that is, the ratio of surplus-value to wages,
will be the same, but in
the second case the amount of surplus-value will rise,
since twice as much labour will be employed at the same rate
of surplus labour. The rate of profit will rise in
both cases, although there has been no change in the
production cost of wages. It will rise because, to
obtain the rate of profit, the surplus-value is calculated
on the production costs of the capitalist, that is,
on the total value of the capital he expends, and
this has fallen. He now needs a smaller outlay in
order to produce the same amount of surplus-value. In
the second case, not only the rate but also the amount of
profit will rise, because surplus-value itself has risen as
a consequence of the increased employment of labour, without
this increase resulting in an additional cost for raw
material. Here again, increases in the rate and the
amount of profit will take place without any kind of change
in the value of labour.

Suppose on the other hand that cotton doubles in value as
a result of a bad harvest so that the same amount of cotton
||336| which formerly cost
£100 now costs £200. In this case, the
rate of profit will fall at all events, but in certain
circumstances, the amount or absolute magnitude of profit
may fall as well. If the capitalist employs the same
number of workers, who do the same amount of work as they
did before, under exactly the same conditions as before, the
rate of profit will fall, although the ratio of surplus
labour to necessary labour, and therefore the rate and the
yield of surplus-value, will remain the same.
The rate of profit falls because the production costs of
surplus-value have risen, i.e., the capitalist has to spend
£100 more on raw material in order to appropriate the
same amount of other people’s labour-time as before.
However, if the capitalist is now forced to allocate a part
of the money which he formerly spent on wages to buying
cotton, e.g., to spend £150 on cotton, of which sum
£50 formerly went on wages, then the rate and the
amount of profit fall, the amount decreases because less
labour is being employed, even though the rate of
surplus-value remains the same. The result would be
the same if, owing to a bad harvest, there were not enough
cotton available to absorb the same amount of living labour
as formerly. In both cases, the amount and the rate of
profit would fall, although the value of labour would remain
the same; in other words, the rate of surplus-value or the
quantity of unpaid labour which the capitalist receives in
relation to the labour for which he pays wages, remains
unchanged.

Thus, when the rate of surplus-value, that is,
when the value of labour, remains unchanged, a
change in the value of constant capital must produce a
change in the rate of profit and may be accompanied by a
change in the total amount of profit.

On the other hand, as far as the worker is concerned:

If the value of cotton, and therefore the value of the
product into which it enters, falls, he still receives the
same amount of wages, equal to 10 hours of labour. But
he can now buy the cotton goods which he himself uses more
cheaply, and can therefore spend part of the money he
previously spent on cotton goods on other things. It
is only in this proportion that the necessities of life
available to him increase in quantity, that is, in the
proportion in which he saves money on the price of cotton
goods. For apart from this, he now receives no more
for a greater quantity of cotton goods than he did
previously for a smaller quantity. Other goods have
risen in the same proportion as cotton goods have
fallen. In short, a greater quantity of cotton goods
now has no more value than the smaller quantity had
previously. In this case, therefore, the value of
wages would remain the same, but it would represent a
greater quantity of other commodities
(use-values). Nevertheless, the rate of profit
would rise although, given the same circumstances, the rate
of surplus-value could not rise.

The opposite is the case when cotton becomes
dearer. If the worker is employed for the same amount
of time and still receives a wage equal to 10 hours as he
did previously, the value of his labour would remain the
same, but its use-value would fall insofar as the worker
himself is a consumer of cotton goods. In this case,
the use-value of wages would fail, its
value, however, would remain unchanged,
although the rate of profit would also fall. Thus,
whereas surplus-value and (real) wages always fall and rise
in inverse ratio (with the exception of the case where the
worker participates in the [yield of the] absolute
lengthening of his working-day; but when this happens, the
worker uses up his labour-power all the more quickly), it is
possible for the rate of profit to rise or fall in the first
case although the value of wages remains the same and their
use-value increases, in the second case although the
value of wages remains the same, while their
use-value falls.

Consequently, a rise in the rate of profit resulting from
a fall in the value of constant capital, has no
direct connection whatever with any kind of variation in the
real value of wages (that is, in the labour-time contained
in the wages).

If we assume, as in the above case, that cotton falls in
value by 50 per cent, then nothing could be more incorrect
than to say either that the production costs of wages have
fallen or that, if the worker is paid in cotton goods and
receives the same value as he did previously, that is, if he
receives a greater amount of cotton goods than he did
previously (since although 10 hours, for example, still
equals 10sh., I can buy more cotton goods for 10sh. than I
could before, because the value of raw cotton has fallen),
the rate of profit would remain the same. The rate of
surplus-value remains the same, but the ||337| rate of profit rises.
The production costs of the product fall, because an
element of the product—its raw material—now
costs less labour-time than previously. The production
costs of wages remain the same as before, since the worker
works the same amount of labour-time for himself and
the same for the capitalist as he did before.
(The production costs of wages do not depend however on the
labour-time which the means of production used by the worker
cost, but on the time he works in order to reproduce his
wages. According to Mr. Mill, the production costs of
a worker’s wages would be greater if, for example, he worked
up copper instead of iron, or flax instead of cotton; and
they would be greater if be sowed flax seed rather than
cotton seed, or if he worked with an expensive machine
rather than with no machine at all, but simply with
tools.) The production costs of profit would
fall because the aggregate value, the total amount of the
capital advanced in order to produce the surplus-value would
fall. The cost of surplus-value is never greater than
the cost of the part of capital spent on wages. On the
other hand, the cost of profit is equal to the total cost of
the capital advanced in order to create this
surplus-value. It is therefore determined not only by
the value of the portion of capital which is spent on wages
and which creates the surplus-value, but also by the value
of the elements of capital necessary to bring into action
the one part of capital which is exchanged against living
labour. Mr. Mill confuses the production costs of
profit with the production costs of surplus-value, that is,
he confuses profit and surplus-value. This analysis
shows the importance of the cheapness or dearness of raw
materials for the industry which works them up (not to speak
of the relative cheapening of machinery*), even
assuming that the market price is equal to the value of
the commodity, that is, that the market price of the
commodity falls in exactly the same ratio as do the raw
materials embodied in it.

Colonel Torrens is therefore correct when he says with
regard to England:

In relation “… to a country in the condition
of England, the importance of a foreign market must be
measured not by the quantity of finished goods which it
receives, but by the quantity of the elements of
reproduction which it returns” (R. Torrens, A
Letter to [the Right Honourable] Sir Robert Feet
[…] on the Condition of England etc., second
ed., London, 1843, p. 275).

<The way Torrens seeks to prove this, however, is
bad. The usual talk about supply and demand.
According to him it would appear that if, for example,
English capital which manufactures cotton goods grows more
rapidly than capital which grows cotton, in the United
States for instance, then the price of cotton rises and
then, he says:

“… the value of cotton fabrics
will decline in relation to the elementary cost of their
production” [op. cit., p. 240].

That is to say, while the price of the raw material is
rising due to the growing demand from England, the price of
cotton fabrics, raised by the rising price of the raw
material, will fall; we can indeed observe at the present
time (spring 1862), for instance, that cotton twist is
scarcely more expensive than raw cotton and woven cotton
hardly any dearer than yarn. Torrens, however, assumes
that there is an adequate supply of cotton, though at a
rather high price, available for consumption by English
industry. The price of cotton rises above its
value. Consequently, if cotton fabrics are sold at
their value, this is only possible provided the
cotton-grower secures more surplus-value from the total
product than is his due, by actually taking part of the
surplus-value due to the cotton manufacturer. The
latter cannot replace this portion by raising the price,
because demand would fall if prices rose. On the
contrary, his profit may decline even more as a consequence
of falling demand than it does as a consequence of the
cotton-grower’s surcharge.

The demand for raw materials—raw cotton, for
example—is regulated annually not only by the
effective demand existing at a given moment, but by the
average demand throughout the year, that is, not only by the
demand from the mills that are working at the time, but by
this demand increased by the number of mills which,
experience shows, will start operating
during the course of the coming year, that is, by the
relative increase in the number of mills taking
place during the year, or by the surplus demand ||338| corresponding to this relative
increase.

Conversely, if the price of cotton, etc., should fall,
e.g., as a result of an especially good harvest, then in
most cases the price falls below its value, again through
the law of demand and supply. The rate of
profit—and possibly, as we saw above, the total amount
of profit—increases, consequently, not only in the
proportion in which it would have increased had the cotton
which has become cheaper been sold at its value; but it
increases because the finished article has not become
cheaper in the total proportion in which the
cotton-grower sold his raw cotton below its value, that is,
because the manufacturer has pocketed part of the
surplus-value due to the cotton-grower. This does not
diminish the demand for his product, since its price falls
in any case due to the decrease in the value of
cotton. However, its price does not fall as much as
the price of raw cot-ton falls below its own value.

In addition, demand increases at such times because the
workers are fully employed and receive full wages, so that
they themselves act as consumers on a significant scale,
consumers of their own product. In cases in which the
price of the raw material declines, not as a result of a
permanent or continuous fall in its average production costs
but because of either an especially good or an especially
bad year (weather conditions), the workers’ wages do not
fall, the demand for labour, however, grows. The
effect produced by this demand is not merely
proportionate to its growth. On the contrary, when the
product suddenly becomes dearer, on the one hand many
workers are dismissed, and on the other hand the
manufacturer seeks to recoup his loss by reducing wages
below their normal level. Thus the normal demand on
the part of the workers declines, intensifying the now
general decline in demand, and worsening the effect this has
on the market price of the product.>

It was mainly his (Ricardian) conception of the
division of the product between worker and capitalist which
led Mill to the idea that changes in the value of constant
capital alter the value of labour or the production costs of
labour; for example, that a fall in the value of the
constant capital advanced results in a decline in the value
of labour, in its production costs, and therefore also in
wages. The value of yarn falls as a result of a
decrease in the value of the raw material—raw
cotton, for example. Its costs of production
decline: the amount of labour-time embodied in it is
reduced. If, for example, a pound of cotton twist were
the product of one man working a twelve-hour day, and if the
value of the cotton contained in this twist fell, then the
value of the pound of twist would fall in the precise degree
that the cotton required for spinning fell. For
example, [the price of] one pound of No. 40 Mule yarn 2nd
quality was 1s. on May 22nd, 1861. It was 11d.
on May 22nd, 1858 (11 6/8d. in actual
fact, since its price did not fall to the same extent as
that of raw cotton). But in the first case a pound of
fair raw cotton cost 8d. (8 1/8d. in
actual fact) and 7d. (7 3/8d. in
actual fact) in the second. In these cases, the value
of the yarn fell in exactly the same degree as the value of
cotton, its raw material. Consequently, says Mill, the
amount of labour remains the same as it was previously; if
it was 12 hours, the product is the result of the same 12
hours of labour. But there was 1d. less worth of the
pre-existing labour in the second case than in the
first. The labour [-time] is the same, but the
production costs of labour have been reduced (by 1d.).
Now although one pound of cotton twist as twist, as a
use-value, remains the product of 12 hours labour as it was
previously, the value of the pound of twist is
neither now, nor was it previously, the product of 12 hours
work by the spinner. The value of the raw cotton,
which in the first case amounted to two-thirds of 1s., i.e.,
8d., was not the product of the spinner; in the second case,
two-thirds of 11d., that is, 7d., was not his product.
In the first case the remaining 4d, is the product of 12
working hours, and just the same amount—4d.—is
the product in the second. In both cases, his labour
adds only a third to the value of the twist. Thus, in
the first case, only 1/3 lb. of twist
out of 1 lb. of yarn was the product of the spinner
(disregarding machinery) and it was the same in the second
case. The worker and the capitalist have only 4d. to
divide between them, the same as previously, that is,
1/3 lb. of twist. If the worker
buys cotton twist with the 4d., he will receive a greater
quantity of it in the second case than in the first, now
however a bigger quantity of twist is worth the same as a
smaller quantity of twist was previously. But the
division of the 4d. between worker and capitalist remains
the same. If the time worked by the worker to
reproduce or produce his wages is 10 hours, his surplus
labour amounts to 2 hours, as it did previously. He
receives 5/6 of 4d, or of
1/3 lb. of cotton
twist—as he did previously—and the capitalist
receives 1/6. Therefore no
change ||339| has taken place
in respect of the division of the product, of the cotton
twist. None the less, the rate of profit has risen,
because the value of the raw material has fallen and,
consequently, the ratio of surplus-value to the total
capital advanced, that is, to the production costs of the
capitalist, has increased.

If, for the sake of simplification, we abstract from the
machines, etc., then the two cases stand as follows:

Price of 1 lb. of twist

Constant capital

Labour added

Wages

Total expenditure

surplus-value

Rate of profit

1st case

12d.

8d.

4d.

131/3 farthings

11d. 4/3 farthings

22/3 farthings

515/17 per cent

2nd case

11d.

7d.

4d.

131/3 farthings

10d. 4/3 farthings

22/3 farthings

614/31 per cent

Thus the rate of profit has risen although the
value of labour has remained the same and the
use-value of the labour as expressed in cotton twist has
risen. The rate of profit has risen without any kind
of variation in the labour-time which the worker
appropriates for himself, solely because the value of
the cotton, and consequently the total value of the
production costs of the capitalist, has fallen. 2
2/3 farthings on 11d.
4/3 farthings expenditure is naturally
less than 2 2/3 farthings on
10d. 4/3 farthings expenditure.

***

In the light of what has been said above, the
fallaciousness of the following passages with which Mill
concludes his illustration becomes clear,

“If the cost of production of wages
had remained the same as before, profits could not have
risen. Each labourer received one quarter of corn; but
one quarter of corn at that time was the result of the same
cost of production as 1 1/5 quarter
now. In order, therefore, that each labourer should
receive the same cost of production, each must […]
receive one quarter of corn, plus one-fifth” ([John
Stuart Mill, Essays on some unsettled Questions of Political
Economy, London, 1844,] p. 103).

“Assuming, therefore, that the
labourer is paid in the very article he produces, it is
evident that, when any saving of expense takes place in the
production of that article, if the labourer still receives
the same cost of production as before, he must receive an
increased quantity, in the very same ratio in which the
productive power of capital has been increased. But,
if
so, the outlay of the capitalist will bear exactly the
same proportion to the return as it did before; and profits
will not rise.” (This is wrong.) “The
variations, therefore, in the rate of profits, and those in
the cost of production of wages, go hand in hand, and are
inseparable. Mr. Ricardo’s principle […] is
strictly true, if by low wages be meant not merely wages
which are the produce of a smaller quantity of labour, but
wages which are produced at less cost, reckoning labour and
previous profits together” (loc. cit., p.104).

Thus according to Mill’s illustration, Ricardo’s view is
strictly true if low wages (or the production costs of wages
in general) are taken to mean not only the opposite of what
he said they mean, but if they are taken to mean absolute
nonsense, namely, that the production costs of wages are
taken to mean not that portion of the working-day which the
worker works to replace his wages, but also the production
costs of the raw material he works up and the machinery he
uses, that is, labour-time which he has not expended
at all—neither for himself nor for the capitalist.

***

Fifthly. Now comes the real question: How
far can a change in the value of constant capital affect the
surplus-value?

If we say that the value of the average daily wage is
equal to 10 hours or, what amounts to the same thing, that
from the working-day of, let us say, 12 hours which the
worker labours, 10 hours are required in order to produce
and replace his wages, and that only the time he works over
and above this is unpaid labour-time in which he produces
values which the capitalist ||340| receives without having paid
for them; this means nothing more than that 10 hours of
labour are embodied in the total quantity of means of
subsistence which the worker consumes. These 10 hours
of labour are expressed in a certain sum of money with which
he buys the food.

The value of commodities however is determined by the
labour-time embodied in them, irrespective of whether this
labour-time is embodied in the raw material, the machinery
used up, or the labour newly added by the worker to the raw
material by means of the machinery. Thus, if there
were to be a constant (not temporary) change in the value of
the raw material or of the machinery which enter into this
commodity—a change brought about by a change in the
productivity of labour which produces this raw material and
this machinery, in short, the constant capital embodied in
this commodity—and if, as a result, more or
less labour-time were required in order to produce this
part of the commodity, the commodity itself would
consequently be dearer or cheaper (provided both the
productivity of the labour which transforms the raw material
into the commodity and the length of the working-day
remained unchanged). This would lead either to a rise
or to a fall in the production costs, i.e., the value, of
labour-power; in other words, if previously out of the 12
hours the worker worked 10 hours for himself, he must now
work 11 hours, or, in the opposite case, only 9 hours for
himself. In the first case, his labour for the
capitalist, i.e., the surplus-value, would have declined by
half, from two hours to one; in the second case it would
have risen by half, from two hours to three. In this
latter case, the rate of profit and the total profit of the
capitalist would rise, the former because the value of
constant capital would have fallen, and both because the
rate of surplus-value (and its amount in absolute figures)
would have increased.

This is the only way in which a change in the value of
constant capital can affect the value of labour, the
production cost of wages, or the division of the working-day
between capitalist and worker, hence also the
surplus-value.

However, this simply means that for the capitalist who,
for example, spins cotton, the necessary labour-time of his
own workers is determined not only by the productivity of
labour in the spinning industry, but likewise by the
productivity of labour in the production of cotton, of
machinery, etc., just as it is also determined by the
productivity in all branches of industry whose
products—although they do not enter as constant
capital, that is, either as raw material or as machinery,
etc., into his product (a product which, it is assumed,
enters into the consumption of the worker), into the
yarn—constitute a part of the circulating capital
which is expended in wages, that is, by the productivity in
the industries producing food, etc. What appears as
the product in one industry appears as raw material or
instrument of labour in another; the constant capital of one
industry thus consists of the products of another industry;
in the latter it does not constitute constant capital, but
is the result of the production process within this
branch. To the individual capitalist it makes a great
deal of difference whether the increased productivity of
labour (and therefore also the fall in the value of
labour-power) takes place within his own branch of industry
or amongst those which supply his industry with constant
capital. For the capitalist class, for
capital as a whole, it is all the same.

Thus this case <in which a fall (or a rise) in the
value of constant capital is not due to the fact that the
industry employing this constant capital produces on a large
scale, but to the fact that the production costs of constant
capital itself have changed> concurs with the laws
elaborated for surplus-value.

When in general we speak about profit or rate of profit,
then surplus-value is supposed to be
given. The influences therefore which determine
surplus-value have all operated. This is the
presupposition.

***

Sixthly. In addition, one could have set
forth how the ratio of constant capital to variable capital
and hence the rate of profit is altered by a
particular form of surplus-value. Namely, by the
lengthening of the working-day beyond its normal
limits. ||341| This
results in the diminution of the relative value of the
constant capital or of the proportionate part of value which
it constitutes in the total value of the product. But
we will leave this till Chapter III where the greater part
of what has been dealt with here really belongs.

***

Mr. Mill, basing himself on his brilliant illustration,
advances the general (Ricardian) proposition:

“The only expression of the
law of profits … is, that they depend on the cost of
production of wages” (loc. cit., pp. 104-05).

On the contrary, one should say: The rate of profit (and
this is what Mr. Mill is talking about) depends
exclusively on the cost of production of wages only
in one single case. And this is when the rate
of surplus-value and the rate of profit are
identical. But this can only occur if the whole
of the capital advanced is laid out directly in wages, so
that no constant capital, be it raw material, machinery,
factory buildings, etc., enters into the product, or that
the raw material, etc., insofar as it does enter, is not the
product of labour and costs nothing—a case which is
virtually impossible in capitalist production.
Only in this case are the variations in the rate of
profit identical with the variations in the rate of
surplus-value, or, what amounts to the same thing, with the
variations in the production costs of wages.

In general however (and this also includes the
exceptional case mentioned above) the rate of profit is
equal to the ratio of surplus-value to the total value of
the capital advanced.

If we call the surplus-value S, and the value of
the capital advanced C, then profit works out at
S: C or S/C. This ratio is
determined not only by the size of S <and all
the factors which determine the production cost of wages
enter into the determination of S> but also by
the size of C. But C, the total value of
the capital advanced, consists of the constant capital,
c, and the variable capital, v (laid out in
wages). The rate of profit is therefore S :
(v+c)=S: C. But S itself, the
surplus-value, is determined not only by its own rate, i.e.,
by the ratio of surplus labour to necessary labour, in other
words, by the division of the working-day between capital
and labour, that is, its division into paid and unpaid
labour-time. The quantity of surplus-value, i.e., the
total amount of surplus-value, is likewise determined by the
number of working-days which capital exploits
simultaneously. And, for a particular capital, the
amount of labour-time employed at a definite rate of unpaid
labour depends on the time in which the product remains in
the actual production process without labour being
applied or without the same amount of labour as was required
formerly (for example, wine before it has matured, corn once
it has been sown, skins and other materials which are
subjected to chemical treatment for a certain period, etc.),
as well as on the length of time involved in the circulation
of the commodity, the length of time required for the
metamorphosis of the commodity, that is, the interval
between its completion as a product and its reproduction as
a commodity. How many days can be worked
simultaneously (if the value of wages, and therefore the
rate of surplus-value, is given) depends in general on the
amount of capital expended on wages. But on the
whole, the factors mentioned above modify the total amount
of living labour-time which a capital of a given size
can employ during a definite period—during a year, for
example. These circumstances determine the absolute
amount of labour-time which a given capital can
employ. This does not, however, alter the fact that
surplus-value is determined exclusively by its own rate
multiplied by the number of days worked
simultaneously. These circumstances only determine the
operation of the last factor, the amount of labour-time
employed.

The rate of surplus-value is equal to the ratio of
surplus labour in one working-day, that is, it is
equal to the surplus-value yielded by a single
working-day. For example, if the working-day is 12
hours and the surplus labour 2 hours, then these 2 hours
constitute 1/6 of the total
labour-time of 12 hours; but we must calculate them on the
necessary labour (or on the wages paid for it, they
represent the same quantity of labour-time in
materialised form); [therefore it is]
1/5 (1/5 of 10
hours=2 hours) (1/5=20 per
cent). In this case the amount of surplus-value
(yielded in a single day) is determined entirely by the
rate. If the capitalist operates on the scale of 100
such ||342| days, then the
surplus-value (its total amount) will be 200 labour
hours. The rate has remained the same—200 hours
for 1,000 hours of necessary labour will give
1/5, or 20 per cent. If the rate
of surplus-value is given, its amount depends entirely on
the number of workers employed, that is, on the total amount
of capital expended on wages, variable capital. If the
number of workers employed is given, that is, the
amount of capital laid out in wages, the variable
capital, then the amount of surplus-value depends entirely
on its rate, that is, on the ratio of surplus labour to
necessary labour, on the production costs of wages, on the
division of the working-day between capitalist and
worker. If 100 workers (working 12 hours a day)
provide me with 200 labour hours, then the total amount of
surplus-value will be 200, the rate
1/5 of a [paid] working-day, or 2
hours. And the surplus-value comes to 2 hours
multiplied by 100 [=200]. If 50 workers provide me
with 200 labour hours, then the total amount of the
surplus-value is 200 hours; the rate is
2/5 of a (paid) working-day, that is,
4 hours. And the surplus-value amounts to 4 hours
multiplied by 50 =200. Since the total amount of
surplus-value is equal to the product of its rate and the
number of working-days, it can remain the same although the
factors change in an inverse ratio.

The rate of surplus-value is always expressed in the
ratio of surplus-value to variable capital. For
variable capital is equal to the total amount of the paid
labour-time; surplus-value is equal to the total amount of
unpaid labour-time. Thus the ratio of surplus-value to
variable capital always expresses the ratio of the unpaid
part of the working-day to the paid part. For example,
in the case mentioned previously, let the wage for 10 hours
be 1 thaler, where 1 thaler represents a quantity of silver
which contains 10 hours of labour. 100 working-days
are consequently paid for with 100 thaler. Now if the
surplus-value amounts
to 20 thaler, the rate is 20/100,
or 1/5, or 20 per cent. Or what
amounts to the same thing, the capitalist receives 2 hours
for every 10 working hours (equal to 1 thaler); for 100x10
working hours, that is, 1,000 hours, he receives 200 hours
or 20 thaler.

Thus, although the rate of surplus-value is determined
exclusively by the ratio of surplus labour-time to necessary
time, in other words, by the corresponding part of the
working-day which the worker requires to produce his wages,
that is, by the production cost of wages, the amount of
surplus-value is moreover determined by the number of
working-days, by the total quantity of labour-time which is
employed at this definite rate of surplus-value, that is, by
the total amount of capital expended on wages (if the rate
of surplus-value is given). But since profit is the
ratio, not of the rate of surplus-value, but of the total
amount of surplus-value to the total value of the capital
advanced, then clearly its rate is determined not only by
the rate, but also by the total amount of surplus-value, an
amount which depends on the compound ratio of the rate and
the number of workingdays, on the amount of capital expended
on wages and the production costs of wages.

If the rate of surplus-value is given, then its amount
depends exclusively on the amount of capital advanced (laid
out in wages). Now the average wage is the same, in
other words, it is assumed that workers in all branches of
industry receive a wage of 10 hours, for example. (In
those branches of industry where wages are higher than the
average, this, from our point of view and for the matter
under consideration, would amount to the capitalist
employing a greater number of unskilled
workers.) Thus, if it is assumed that the surplus
labour is equal, and this means that the entire normal
working-day is equal (the inequalities cancel one another
out in part since one hour of skilled labour, for example,
is equal to two hours of unskilled labour), ||343| then the amount of the
surplus-value depends entirely on the amount of capital
expended [on wages]. It can therefore be said that the
amounts of surplus-value are proportional to the amounts of
capital laid out (in wages). This does not, however,
apply to profit, since profit [expresses] the ratio of
surplus-value to the total value of the capital expended,
and the portion which capitals of equal size lay out in
wages, or the ratio of variable capital to the total
capital, can be and is very different. The amount of
profit—as regards the different capitals—here
depends on the ratio between the variable capital and the
total capital, that is,
onv/c+v. Thus, if the rate of
surplus-value is given, and it is always expressed by
s/v, by the ratio of surplus-value to variable
capital, then the rate of profit is determined entirely by
the ratio of variable capital to the total capital.

The rate of profit is thus determined, firstly, by the
rate of surplus-value, that is, by the ratio of unpaid
labour to paid labour; and it changes, rises or falls
(insofar as this action is not rendered ineffectual by
movements of the other determining factors), with changes in
the rate of surplus-value. This, however, rises or
falls in direct proportion to the productivity of
labour and in inverse proportion to the value of
labour, that is, to the production costs of wages or the
quantity of necessary labour.

Secondly, however, the rate of profit is
determined by the ratio of variable capital to the total
capital, by v/c+v. The total amount of
surplus-value, where its rate is given, depends of course
only on the size of the variable capital, which, on the
assumption made, is determined by, or simply expresses, the
number of working-days worked simultaneously, that is, the
total amount of labour-time employed. But the rate of
profit depends on the ratio of this absolute magnitude of
surplus-value, which is determined by the variable capital,
to the total capital, that is, on the ratio between variable
capital and total capital, on v/c+v. Since S,
surplus-value, has been assumed as given in calculating the
rate of profit, and therefore v is likewise assumed
as given, any variations occurring in can be due only to
variations in c, that is, in constant capital.
For if v is given, the sum c+v, equal to
C, can only change if c changes and the ratio
v/c+v or v/C changes with changes in the
sum.

If v=100, c=400, then v+c=500 and
v/v+c = 100/500=
1/5 = 20 per cent. Therefore, if
the rate of surplus-value came to 5/10
or 1/2, [the amount of surplus-value]
would be 50. But since the variable capital is only
equal to 1/5 the total capital, the
profit is therefore a half of a fifth, that is, one-tenth
[of the total capital] and, in fact,
1/10 of 500, which is 50, that is, 10
per cent. The ratio v/c+v changes with every
change in c, but naturally not by the same numerical
quantity. If we assume that v and c
amount
originally to 10 each, that is to say, that the total
capital consists of half variable and half constant capital,
then v/v+c = 10/10+10
=10/20=1/2.
If the rate of surplus-value is 1/2 of
v, then it is equal to 1/4 of
C. In other words, if the surplus-value is 50
per cent, then in this case, where the variable capital is
C/2, the rate of profit comes to 25 per cent. If we
now assume that the constant capital is doubled, i.e., it
increases from 10 to 20 then v/c+v =
10/20+10 = 10/30
= 1/3. (The rate of
surplus-value, 1/2 of 10, would now be
1/2 of 1/3 of
C, that is, 1/6 of 30, that is,
5. Thus 1/2 of 10=5, 5calculated
on 10 is 50 per cent, 5 calculated on 30 is 16
2/3 per cent. On the other hand,
5 calculated on 20 was 1/4, that is 25
per cent.) The constant capital has doubled, that is,
it has increased from 10 to 20. But the sum c+v
has only increased by half namely, from 20 to 30. The
constant capital has increased by 100 per cent, the sum
c+v only by 50 per cent. The ratio v/c+v
originally 10/20, has fallen to
10/30, that is, from a half to a
third, that is, from 3/6 to
2/6. Thus it has fallen by only
1/6, where- as the constant capital
has been doubled. How the growth or decline in the
constant capital affects the ratio v/c+v depends
evidently on the proportion in which c and v
originally constitutee parts of the whole capital C
(consisting of c+v).

||344| The constant
capital (that is, its value) can firstly rise(or
fall) although the amounts of raw material, machinery, etc.,
employed, remain the same. In this case therefore, the
variations in constant capital are not determined by the
conditions of production prevailing in the industrial
process into which it enters as constant capital, but are
independent of them. Whatever the causes
bringing about the change in value may be, they always
influence the rate of profit. In this case, the same
amount of raw material, machinery, etc., has more or less
value than it did previously, because more or less
labour-time was required to produce them. The
variations, then, are determined by the conditions
production of the processes from which the component parts
of constant capital emerge as products. We have
already[yy] examined
how this affects the rate of profit.

As far as the rate of profit is concerned, whether in a
particular industry constant capital, raw material, for
example, rises or falls in value because its own production
has become dearer, etc., amounts to the same thing as if in
some branch of industry (or even in the same branch) more
expensive raw material were used for the production of one
type of commodity than for that of another type, while the
outlay on wages remained unchanged.

When there is equal expenditure on wage-labour, but the
raw material worked up by one kind of capital (corn,
for example) is dearer than the raw material worked up by
another (oats, for example) (or, for that matter, silver and
copper, etc., or wool and cotton, etc.), the rate of profit
for the two capitals must be in inverse proportion to the
dearness of the raw material. Thus, if on the average
the same profit is made in both branches of industry, then
this is only possible because the surplus-value is shared
between the capitalists, not in accordance with the ratio of
surplus-value which each capitalist produces in his own
particular sphere of production but in relation to the size
of the capital they employ. This can happen in two
ways. A, who works up the cheaper material, sells his
commodity at its real value; he thereby also pockets the
surplus-value he himself has produced. The price of
his commodity is equal to its value. B, who works up
dearer material, sells his commodity above its value and
charges as much in his price [in order that his commodity
should yield a corresponding profit] as if he had been
working up a cheaper material. If A and B exchange
their products, then it is the same for A as if he had
included a smaller amount of surplus-value in the price of
his commodity than it actually contains. Or as if both
A and B had from the very beginning charged a rate of profit
commensurate with the size of the capital invested, that is,
had divided the joint surplus-value between them on the
basis of the amount of the capital they had invested.
And this is what the term general rate of profit
denotes.

Naturally this equalisation does not take place when the
constant element in a particular capital such as raw
materials, for example, falls or rises temporarily under the
influence of the seasons, etc. Although the
extraordinary profits made by the cotton-spinners, for
example, in years of especially good cotton crops,
undoubtedly lead to an influx of new capital into this
branch of industry and give rise to the building of a large
number of new factories and of textile machinery. If a
bad year for
cotton ensues, then the loss [because of the sudden rise
in the price of cotton] will be all the greater.

Secondly, the production costs of machinery, raw
materials, in short of constant capital, remain the same,
but larger amounts of them may be required; their value
therefore grows in proportion to the growing amount used as
a result of the changed conditions of production in the
processes in which those elements enter as means of
production. In this case, as in the previous example,
the increase in the value of constant capital results of
course in a fall in the rate of profit. On the other
hand however, these variations in the conditions of
production themselves indicate that labour has become more
productive and thus that the rate of surplus-value has
risen. For more raw material is now being consumed by
the same amount of living labour only because it can now
work up the same amount in less time, and more machinery is
now being used only because the cost of machinery is smaller
than the cost of the labour it replaces. Thus it is a
question here of making up to a certain extent the fall in
the rate of profit by increasing the rate of surplus-value
and therefore also the total amount of surplus-value.

Finally, the two factors responsible for the change in
value can operate together in very different
combinations. For example, ||345| the average value of raw
cotton has fallen, but simultaneously the value of the
amount of cotton which can be worked up in a certain time,
has increased even more. [Or] the value of cotton has
risen, and so has the value of the total amount of it which
can be worked up in a given time. Machinery with
increased productive capacity has become dearer in absolute
terms, but has become cheapen in relation to its efficiency,
and so forth.

It has been assumed hitherto that the variable capital
remains unchanged. Variable capital, however, can also
decline not only relatively but absolutely, as for example
in agriculture; that is, it can decline not only relative to
the size of the constant capital. Alternatively,
variable capital can increase absolutely. In this
case, however, it is the same as if it remained unchanged,
insofar as the constant capital grows in a greater or in the
same ratio the reasons mentioned above.

If the constant capital remains unchanged, then any rise
or fall of it in relation to the variable capital is
accounted for only by a relative rise or fall of the
constant capital due to an absolute fall or rise of the
amount of variable capital.

If the variable capital remains unchanged, then every
rise or fall in the constant capital can be explained only
by its own absolute rise or fall.

If variations take place in both variable and constant
capital simultaneously, then after deducting the variations
which are identical in both, the result is the same as if
one had remained unchanged while the other had risen or
fallen.

Once the rate of profit is given, the amount of
profit depends on the size of the capital employed. A
large capital with a low rate of profit yields a larger
profit than a small capital with a high rate of profit.

***

So much for this digression.

Apart from this, only the two following passages from
John Stuart Mill require comment:

“Capital, strictly speaking,
has no productive power. The only productive
power is that of labour; assisted, no doubt, by tools, and
acting upon raw materials”[zz] (op. cit., p. 90).

Strictly speaking, he here confuses capital with the
material elements of which it is constituted. However,
the passage is valuable for those who do the same thing and
who nevertheless assert that capital has productive
power. Of course, here too the matter is only stated
correctly insofar as the production of value is
considered. After all, nature also produces insofar as
it is only a question of use-values.

“… productive power of
capital […] can only mean[aaa] the quantity of real productive
power which the capitalist, by means of his capital, can
command” (loc. cit., p. 91).

Here capital is conceived correctly as a production
relation. |VIII-345||

***

||XIV-851| In a previous
notebook I have traced in detail how Mill violently attempts
to derive Ricardo’s law of the rate of profit (in
inverse proportion to wages) directly from the law of value
without distinguishing between surplus-value and
profit.

[8. Conclusion]

This whole account of the Ricardian
school shows that it declines at two points.

1) Exchange between capital and labour corresponding to
the law of value.

2) Elaboration of the general rate of profit.
Identification of surplus-value and profit. Failure to
understand the relation between values and cost-prices.

*||XV-887| <The following has to
be added with regard to Bailey’s insipidity.

When he says that A is distant from B, he does not
thereby compare them with one another, equalise them, but
separates them in space. They do not
occupy the same space. Nevertheless he still
declares that both are spatial things and are
differentiated in virtue of being things which belong in
space. He therefore makes them equal in advance, gives
them the same unity. However, here it is a question of
equation.

If I say that the area of the triangle A is equal to that
of the parallelogram B, this means not only that the area of
the triangle is expressed in the parallelogram and that of
the parallelogram in the triangle, but it means that if the
height of the triangle is equal to h and the base
equal to b, then
A=h×b/2, a property which
belongs to it itself just as it is a property of the
parallelogram that it is likewise equal to
h×b/2. As areas,
the triangle and the parallelogram are here declared to be
equal, to be equivalents, although as a triangle and a
parallelogram they are different. In order to equate
these different things with one another, each must represent
the same common element regardless of the
other. If geometry, like the political economy of
Mr. Bailey, contented itself with saying that the equality
of the triangle and of the parallelogram means that the
triangle is expressed in the parallelogram, and the
parallelogram in the triangle, it would be of little
value.> |XV-887||

* By
relative cheapening of machinery, I mean that the
absolute value of the amount of machinery employed
increases, but that it does not increase in the same
proportion as the mass and efficiency of the machinery.

[h] This and the
other passages taken by Marx from Parisot’s translation of
Mill’s work are quoted in this volume from James Mill,
Elements of Political Economy, London, 1824.
These quotations are marked “Parisot” and the
French text Marx used can be found in the Appendix of this
volume.—Ed.

[i] This passage
taken by Marx from Prévost’s translation of
McCulloch’s book A Discourse on the Rise, Progress,
Peculiar Objects, and Importance of Political Economy,
is quoted here from the English original, p. 71.—Ed.